(614) 760-1801

Contact  |  FAQ   |  Publications

FAQ - Planning for Adult Children



Parents often struggle with the decision of whether or not to distribute their assets equally to their children. Despite what some people may believe, children are not all equal and usually they should not be treated as equals. Facts and circumstances surrounding a particular child will determine how you will distribute assets, if any, to that child or to his or her beneficiaries. This can be particularly troublesome if there is a family business and not all family members are active in the business.

You should distribute your assets to whom you want, when you want, and in the amounts that are appropriate considering all surrounding issues. You might consider what may be equitable for your beneficiaries rather than constraining yourself by arbitrary notions of equality: equitable may end up being equal, but equal is not always equitable.

Your decision on how to distribute your children's shares to them upon your death should take into consideration such factors as each child's age, health, ability to make financial decisions, family circumstances, and situations with creditors. Basically, you should look at what each child truly needs or may need and plan in the most loving and realistic way you can for that child.



Although your natural inclination may be to give your adult children their inheritances outright, that may not be the best or wisest course of action for them. A well-thought-out series of subtrusts in your living trust can provide for the specific needs of your children. Leaving property to your children in trust can often protect them from their own inexperience with money, from their inability to make wise decisions, from their creditors, or from a divorcing spouse. Adult children who do not have experience with large sums of money are often overwhelmed when they receive an inheritance. They may make some poor choices and come to realize, too late, that their inheritance has gone to poor investments and frivolous spending.

Perhaps an adult child is easily influenced by friends and family and can't say "no" when asked for a handout. Perhaps he or she has a drug or alcohol problem and a large "windfall" will only increase his or her ability to satisfy the dependency. Or perhaps, at the time of your death, one of your children may have the misfortune of being in the middle of a nasty divorce or a lawsuit.

By using trusts, you can plan for all these situations very specifically if they currently exist, or you can plan in anticipation of the possibility of those problems and provide some protection for your children if it is later needed.



They create a subtrust for each child’s share within their living trust document.



This is a common and effective planning strategy. You can provide detailed instructions in each child's trust which specifically meet your hopes, concerns, dreams, values, and aspirations for that child and which specifically address your assessment of that child's strengths and weaknesses.



By doing good planning! Family squabbles are more likely to occur when people do not leave instructions which make their intentions clear. If your instructions are complete and give a clear indication of your intentions, there will be less likelihood that your children will argue over different interpretations of the instructions.

There is nothing wrong with adding language to your estate plan which describes your intentions. The problem with many "cookie-cutter" documents is that no specialized language is added. A good estate planning professional will be able to help you identify your hopes, concerns, and desires and properly incorporate them into your planning documents.


Won't we be unreasonably dominating our children from the grave if we leave our property in trust for them?

You have hopes, dreams, and aspirations for your children while you are living; why should they change when you are dead?

Distributions from the trust should be based upon each child's individual ability to manage and conserve money and the dynamics of each child's marriage situation. However, many parents do not like to restrict one child access to assets while giving the other children full access. Frequently, the practical solution they arrive at is to determine the strategy for the least responsible child and then apply it uniformly to all their children.


Should we give our trustee the authority to make discretionary distributions of trust principal?

The pressure to make periodic distributions of principal is somewhat alleviated if you give the trustee the authority to make interim distributions for legitimate reasons.

Frequently, the trustee is given the authority to make distributions for the "health, education, maintenance, and support" of the child. These are known as the ascertainable standards in the Internal Revenue Code. Collectively they provide for a beneficiary’s all-encompassing needs. Thus, the trustee, in his or her own discretion, could pay for a child's major medical needs. Similarly, the trust could provide the trustee with a standard for discretionary distributions. For example, some parents prefer a conservative standard which requires the existence of a genuine need, while others prefer a more liberal standard which allows financial assistance for such matters as the purchase of a residence, a business, or any other extraordinary opportunity.


Do discretionary distribution plans provide built-in creditor protection?

Yes. Because the distributions are in the trustee’s sole discretion, payments do not have to be made when a beneficiary’s creditors are making demands or lurking nearby. The trustee, who should be an independent trustee rather than a beneficiary or family member, can retain the funds in the safety and protection of the trust.


Are there many strategies for multiple distributions?

There are as many strategies as there are inventive parents and grandparents. In general, however, if a child has not reached middle-age maturity or does not have a track record to demonstrate financial responsibility, it might be appropriate to use a minimum two-stage distribution, five years apart, with quarterly payments of net income throughout the period of the trust. In this way, the child can learn from mistakes he or she makes from the first distribution and hopefully be more responsible with subsequent distributions of principal.

For the same reason, staggered distributions are also appropriate if the trust assets are significant. Distributions typically begin when the child reaches a certain age (usually at age 30 or 35) or on the death of the surviving parent, and they continue at specified intervals over a predetermined period of years. For example:

Distribute 25 percent of our daughter’s share to her on the death of the survivor of us, and distribute the balance in three additional distributions at five-year intervals from that date.


If I set up a revocable living trust and I want my children to be beneficiaries of the trust, can I provide that distributions to my children be made directly to revocable living trusts set up by them?

Yes, you can. Doing so makes a great deal of sense because it allows their inheritance to be governed by their own set of instructions. The inheritance will then be protected from a living probate and a death probate.


Is there a general approach that most people use in planning for responsible adult children?

Usually the children are named as their own trustees in a cotrusteeship with others whom they can name and replace – subject to standards (this "creditor-proofs" the trust estate). In this way, adult children can receive what they want from their trusts whenever they want it.


Can we provide for our children's retirement years through trust planning?

Parents can sometimes reasonably predict that their children will frivolously waste the distributions. A strategy you can use in this situation is to provide the net income to the children and give authority to the trustee to make discretionary distributions of principal with the final distribution at age 55 or later. In other words, the assets are used to ensure the children's retirement.


I'm afraid my children will not save properly for retirement. I'd like them to receive part of my estate immediately upon my death, but is there any way I can make sure that most of what I leave them is retained for their retirement?

Yes. You can design the distribution pattern from your trust to help your children in their retirement years. You could give your trustee instructions to hold some or all of the principal of the trust until your children reach retirement age. This does not need to be an all-or-nothing provision. If you wish the children to have access to a portion of your estate immediately upon your death, you may provide that instruction, with the remainder to be held in trust until the children's retirement age.


How can I protect my son from himself? He is terrible with money, and I'm afraid he will squander his inheritance.

Because such an adult child is likely to squander or lose money immediately, an outright distribution is out of the question. However, most parents love their children regardless of the shortcomings they may have, and those parents want to help their children with their resources rather than simply disinherit them.

A lifetime trust can provide that your son will be taken care of from his share of your estate for his lifetime under definite instructions that take into account the difficulties he is having during life.

An incentive trust can provide that your son must alter his behavior in order to receive distributions from the trust.


My son has a drug addiction. Can I put a provision in my trust that prevents him from accessing any of the trust assets unless he passes a drug test?

Absolutely. Your attorney can draft your trust to your specific requests. A typical provision of this nature will allow for money to be spent on your son's behalf for rehabilitation, but will not allow the trustee to disburse funds unless your son passes a drug test. You may also want to include periodic distributions based on the results from follow-up drug testing.

If you want to provide for your son upon your death but are concerned about the possibility of drug or alcohol abuse, you need only to leave appropriate instructions in your trust document. For example:

Under normal circumstances I would like my son to have all of the income and whatever principal is necessary to provide him with his every need, as long as it is reasonable.

However, if my trustee knows or has reason to suspect that my son is dependent upon or has a problem with drugs and/or alcohol, then my trustee, in my trustee’s sole and absolute discretion, may withhold both income and principal distributions until my son is evaluated for drug and alcohol abuse.

If it is determined that my son has a drug or alcohol abuse problem, my trustee shall offer my child the opportunity to enter a treatment program to be paid for from the assets of my son’s trust.

If my son refuses to seek treatment which in the reasonable discretion of my trustee is warranted and proper, my trustee may withhold payments of both income and principal from my son’s trust until he proves to the satisfaction of my trustee that he no longer has a substance-abuse problem.


Can I provide for the costs of food, shelter, and medical care without giving the funds directly to my addicted daughter?

In order to ensure that the payments are used for the benefit of your daughter, as opposed to her using the trust disbursements to further her habit, the trustee could make all mortgage or rental payments directly to the mortgage company or landlord. Similar arrangements could be made for medical expenses, food, clothing, and expenditures for other basic necessities.


How can I leave my assets to my children without squelching their incentive to be responsible and to grow and develop?

To promote gratitude and philanthropy, you could leave a portion of your estate to a charitable foundation and name your children as trustees. To give them an incentive to provide for themselves and their families, you could match their earnings, dollar for dollar, or double their annual incomes when they hit some income milestone such as $100,000.


I want my children to lead productive, hard-working lives which contribute to our society. How can I build incentives into their inheritance without being overly controlling or just giving them too much money?

There are a number of approaches you might consider:

Opportunity funding: You may instruct your trustee to create or buy an "opportunity" for a child. The benefits to the child will occur primarily if the child successfully develops the opportunity.

Testamentary charitable foundation: You may want to create a trust or foundation in your living trust that springs to life after your death and directs that, under certain guidelines, your children assist in the philanthropic endeavor of giving away the income of the trust. This strategy not only encourages children to look beyond themselves but also enhances their personal and social status in their communities.

Staggered distributions: You may simply want to stagger distributions to the children at certain more mature ages or after certain periods of time. A second- or third-chance formula allows your children to have resources left if they fail to handle their first distributions wisely.

Trustee discretion with criteria: Your trustee can hold a child’s share for life with the discretion to make certain distributions. You can set any number of specific criteria for the exercise of that discretion, such as a liberal or conservative standards for distributions, and you can suggest or direct under what circumstances that child's trust principal should be distributed.

Milestone incentives: You may condition distributions from your trust on your children's reaching certain milestones which can either be clearly defined or be left to the discretion of your trustee.

The opportunities for creating incentives for your children are almost endless; however, you must also be sensitive to the risks of over-controlling. With the assistance of an experienced, knowledgeable estate planning team, you can create the structures which encourage the desired outcome without the negative responses.


How can I make sure that only my children receive their inheritance?

In your living trust, you can create at your death a trust share for each child so that a child's spouse, or ex-spouse, or even a child’s creditors cannot get to the trust-share property.

The trust will contain instructions that all trust shares are created only for the children and their beneficiaries. There will also be spendthrift provisions stating that distributions are to be used only for the child's health, support, maintenance, and education expenditures and that on the beneficiary’s death, the proceeds of his or her trust share will pass directly to grandchildren and others. Spendthrift provisions protect the beneficiaries from the claims of their creditors and from their own attempts at improper actions with regard to the trust’s income or principal.


We have been very fortunate in that all our children's marriages look sound today, but so much can happen, and divorce is so common. Can we protect our legacy from going to a child's spouse in a divorce?

If you choose to leave your property in trust for your children rather than making an outright distribution, you will provide some divorce protection in most states. Unlike an outright distribution, property held in trust for a beneficiary is not owned by the beneficiary; it is owned by the trust. Because it is not owned by the beneficiary, the trust property is generally not subject to the claims of creditors or claims resulting from a divorce proceeding. However, there are exceptions to this general rule. Most states have given judges of family courts broad power to attach property if justice requires. For example, it may be extremely unjust to deny a non-beneficiary spouse a portion of trust property if doing so would impoverish that spouse. In some states, the family court might exercise its equity powers to invade the trust.

Having an independent trustee distribute the trust property in accordance with an ascertainable standard or specific guidelines will provide more protection against a beneficiary’s divorce than would be the case if the beneficiary is the sole trustee with broad powers to demand principal.


I have eight children, four of whom help me operate my dairy farm. The assets of the dairy farm account for 90 percent of my $2 million estate. I want the four who operate the farm to receive it, but I also want the other four to receive an equal share of my estate. Is there a way to accomplish this?

This is a very common agribusiness situation. Life insurance made payable directly to the noninvolved children or payable to a trust for their benefit can go a long way toward equalizing the children's shares. A trust agreement can be structured so that it pays the proceeds to these children free of federal estate tax.


How can our family's vacation retreat be made available to all our children without unfairly burdening any one of them with the cost of upkeep and taxes?

Family retreats (cottages, camps, cabins, etc.) are often the most cherished of estate assets; their use by family members can have a positive effect on family dynamics after parents are gone. However, leaving a share of the cottage, along with its proportion of the upkeep and taxes, to each child may place a burden on some of the sibling owners and may make it difficult for them to equitably divide the use of the retreat.

Creating a family-retreat subtrust in your living trust can afford a workable alternative to dividing the interest among your children. In the subtrust, you can name all the children as trustees and create a fund for maintaining the property regardless of its use.


If someone named in my trust agreement dies before me, how does this affect my revocable living trust?

The death of a named beneficiary generally has no legal effect upon the validity of the revocable living trust. If a beneficiary dies before the trust maker, any trust provisions pertaining to that person will generally lapse and the distribution that would have been made to that person will be distributed as otherwise designated in the trust instrument. If appropriate care has been taken in drafting the trust, it will designate who is to receive a specific bequest of property if a particular named beneficiary dies before the trust maker. In addition, as long as the maker is still alive, he or she is free to amend the trust instrument to account for the death of a beneficiary.



(Back to FAQ)