Loved ones who need a little extra help
Protecting an inheritance for a loved one who may need some extra support
We all have loved ones who are different, and sometimes those differences need to be considered when planning an inheritance.
You might have an adult child who struggles to manage money, is vulnerable to financial exploitation, has experienced addiction, has significant debts, or simply isn’t ready to receive a large inheritance outright.
If you’re thinking, “I want my child to benefit from their inheritance, but I’m not sure giving them a large amount of money outright is the right answer”, there are estate planning strategies that may help.
A Testamentary Discretionary Trust
One option to consider is a testamentary discretionary trust (“TDT”).
A TDT is established through your Will and comes into effect after your death. Instead of your beneficiary receiving their inheritance directly, assets can be held in the trust for their benefit.
A trustee is appointed to manage the trust and decide how and when trust assets or income are distributed to the beneficiaries, in accordance with the terms of the trust.
This can provide an additional layer of protection and flexibility.
For example, the trustee may be able to use trust funds to pay for things your child needs, rather than handing the entire inheritance to them at once.
Depending on the terms of the TDT and your child’s circumstances, this could include things such as:
housing and living expenses
education and training
medical or health-related expenses
vehicles and other significant purchases
holidays and experiences
regular financial support
other expenses that benefit your child.
The aim is to make sure your child can benefit from their inheritance while giving the trustee a framework to manage the inheritance responsibly.
Choosing the right trustee
The person you appoint as trustee is an important part of the strategy.
Your trustee may need to make significant financial decisions, understand the terms of the trust, communicate with your beneficiaries, and make decisions that balance your wishes with the beneficiary’s needs.
You might choose a family member or trusted friend. In some circumstances, a professional trustee may also be worth considering.
There is no one-size-fits-all answer. The right choice depends on your family relationships, the assets involved, your child’s circumstances, and what you want the trust to achieve.
Your estate plan can be built around your family
Your children don’t all have to receive their inheritance in exactly the same way.
One child might be perfectly comfortable receiving an inheritance directly. Another might benefit from having their inheritance held and managed through a trust.
Your estate plan can take those differences into account.
For parents, this can provide some comfort that the inheritance you have worked hard to create can continue to benefit your children in a way that takes their individual circumstances into consideration.
A TDT isn’t the right solution for every family, and it needs to be carefully drafted around your circumstances and goals.
If you’re concerned about how an inheritance might affect one of your children, this is something worth discussing as part of your estate planning.
We can help you explore the options and understand how they could work for your family.
Learn how a testamentary discretionary trust can protect your family's inheritance.
Thinking about including a testamentary discretionary trust in your Will?
Our free guide explains how testamentary discretionary trusts work, their potential benefits and limitations, and when they may be worth considering as part of your estate plan.