It is increasingly common today for parents to have concerns about one or more of their children’s money management skills and judgment. These concerns may arise from a variety of factors including substance abuse, gambling, a spouse that is perceived to be untrustworthy, and sometimes just plain run-of-the-mill immaturity. Regardless of the source of the concern, many parents desire to impose certain controls so that a child’s inheritance will not be squandered or mismanaged.
The Will and the Living Trust are excellent tools for accomplishing just this kind of control. It is very common practice to appoint a trustee to manage the inheritance assets in accordance with a specific set of instructions from the testator as to how the money is to be used for the benefit of the beneficiary. Discretionary distributions can be conditioned upon things like sobriety or employment considerations. Specific purposes for the trust funds can be established, as well as benchmarks of accomplishment or achievement for receiving those distributions. The trust fund can be administered over a period of time, giving periodic distributions when the beneficiary reaches a certain age.
These kinds of trusts, which come into effect after the death of the decedent, can be created either in a Living Trust or in a Will. Careful consideration must be given to the selection of the trustee, as they must not only be trustworthy, but must have the discipline and strength of character to resist the protests and likely discontent of the prodigal son or daughter who resents not being able to receive the entire inheritance all at once. Consideration should also be given to whether or not imposing restrictions is a good idea at all in that it may contribute to significant family disharmony no matter how justified the restrictions nor how well intentioned they might be.
Sometimes it is a good idea to include what is known as a “no contest clause” in a trust or Will which essentially provides that, in the event that any of the beneficiaries contest the distribution provisions of the Will or trust, they forfeit their inheritance. Oregon law upholds the use of these provisions so long as the trustor or testator is competent at the time of executing the trust or Will and not under undue influence.
Article Written By: Carl F. Jepsen, Warren Allen LLP
DISCLAIMER: The information contained herein is based on Oregon law and is subject to change. It should be used for general purposes only and should not be construed as specific legal advice by Warren Allen, LLP or its attorneys. Neither this website nor use of its information creates an attorney – client relationship. If you have specific legal questions, consult with your own attorney or call us for an appointment.