What to do with a “Problem Child”

How do I Estate Plan for a problem Child?

Parents have high expectations for their children. They hope that their children will grow into mature, well-balanced individuals that are independently minded and can take care of themselves. They hope that their children will navigate away from the temptations and pitfalls that life has to offer, and find only smooth sailing along the way. As every reader knows, however, that isn’t always reality.

For one reason or another, whether it be rebellion, bad luck, drugs, gambling or heaven knows any other myriad number of reasons, some of our children have a tougher time in life. We try to do our best for them while we’re alive, but we won’t always be there to help them through these issues. Although you can never fully plan for every contingency that your child may face down the road, hopefully you’ll have enough foresight to even-handedly address the issues about which you are aware while time provides.

While money doesn’t necessarily cause problems in our children’s lives, its presence can certainly help to accelerate those that have already taken root. The last thing we want to do as parents is potentially exacerbate our children’s issues once we are gone by pouring gasoline on the fire. With this reality in mind, the question I pose to you today is how exactly does one estate plan when faced with a so-called problem child?

When estate planning for multiple children (at least one of whom is troubled), one of the biggest hurdles that many parents face is determining how and whether to treat a “good” child differently than a “troubled” one in a will. There is no right or wrong answer to the question, nor is there an easy or one size fits all answer. Depending on your own particular circumstances, you might reach a conclusion that your children should be treated disparately, for whatever reason, or placed on even ground. Parents need to recognize not only the strengths and weaknesses of each of their children (one may be better with money, for example, or another poorly employed), but they also need to come to an understanding about each of their children’s likely needs down the road. If one of your children is an addict, for example, should you be planning for the eventuality that he might need to be admitted to a private rehab facility for treatment? Its individual circumstances like these which – for better or worse – will steer your decision.

Generally speaking, many parents contending with a troubled child (whether you have more than one child or not) will choose not to leave the “problem child” an inheritance outright. The hope with this type of planning is often guided by two trains of thought. Depending on the strategy you choose, your goals may or may not be met, however.

Strategy number 1

As to the first strategy, some parents choose the option of simply restricting a child’s access to funds. The intended goal of this strategy is to minimize the possibility that a troubled child’s circumstances are exacerbated by the introduction of large sums of money, while guaranteeing they are provided for over time. One way in which to structure such a strategy is through the use of a simple annuity. While assets need to be properly titled through beneficiary designation for, annuities are a relative easy way of allowing you to direct how the money is distributed.

Strategy number 2 

The second strategy that many choose when planning for a troubled child’s future is the structuring of access to funds in a certain way that is meant to bring about a particular outcomes. This strategy might affectionately be deemed the carrot and stick approach. This is basically a strategy that seeks to compel a beneficiary into voluntarily accomplishing certain goals or benchmarks in order to receive distributions. Such benchmarks might include anything from getting a college degree to being clean from drugs or alcohol for a period of time. For those contemplating this strategy, the tool sometimes used to accomplish the end is known as an incentive trust, which basically allows you to create any set of triggers you like.

While being the having a troubled child can be frustrating at best and absolutely heart wrenching at other times, the take away from this is that you have options. Not only do you have options for guaranteeing a problem child’s ongoing access to assets once you’re gone, but you have options for hopefully bringing about certain changes in your child’s life even after you’re gone. These are only a few of your options, so be sure to consult with a professional.”
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