Trusting heirs to manage estate

Published online on Monday, Sep. 21, 2009

This week, our questions are about changing a living trust and trusting your kids to manage their inheritance. Attorney Mark S. Drobny provides the answers.

Question: Both my adult children lack the money management skills to prudently invest their share of my estate. They would each inherit several hundred thousand dollars, and it would probably be gone in a few years. What can I do?

Answer: Each of us has every right to attach conditions or incentives to a bequest.

I'm a huge proponent of "incentive trusts." Frequently, our clients stipulate that minor heirs are entitled to their share of an inheritance "upon graduation from an accredited four-year college or university or age 30, whichever occurs first." To most teenagers, age 30 would be far too old to enjoy the money, so graduation happens more quickly.

Another type -- matching funds incentive trusts -- provide that "upon completion of being a full-time student, my child is entitled to an amount from my trust equal to what he earns through the fruits of his labor, payable quarterly."

Heirs with drug or alcohol issues are also candidates for incentive trusts, which can require mandatory random drug testing and forfeiture of trust income for a specified period of time if they test positive or skip a test.

Drafting your trust to take into account each beneficiary's strengths and weaknesses can increase the likelihood that an inheritance will enrich -- rather than ruin -- his or her life.

Q: We did a living trust in 2006 that was done legally and checked by an attorney, who has since retired. We have moved and changed our new home and bank to the living trust. We used the correct forms, but my question is: Do we have to keep (our) attorney and have the changes OK'd by him?

A: In almost any legal matter the client is free to hire and fire his or her attorney. The fact that an attorney prepared or reviewed your trust does not require you to keep using his or her services for the rest of your life.

Your will or trust could be the most important legal document you ever sign. Whether the documents accurately reflect your intentions will not be known until you die. Spending a modest sum to have an experienced estate attorney review documents you have prepared yourself is money well invested.

While you deeded your new home to your trust and "used the correct forms," how do you know they truly are correct? Changing title to real estate may sound easy, but I have seen countless cases where title to real property has become clouded by deeds containing incorrect legal descriptions, defects in title, etc. In most cases, it would have been avoided by using a title company to verify the information or consulting with an estate planning attorney.