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Minneapolis Estate Planning and Probate Lawyer Blog

Tuesday, July 16, 2019

When Beneficiaries Are Not Ready for an Inheritance

Our families and loved ones come in the forms of various people with their own personal challenges and struggles. Some of these people are still learning and exploring what path their lives might take. In the meantime, you will need to consider this when establishing your estate plan. Leaving assets to loved ones can be a life-changing gift for them. It can also quickly be wasted, mismanaged, and squandered. With the right estate planning tools in place, you can give a loved one their inheritance while protecting them from misuse of these funds.

Why Wouldn’t My Beneficiary Be Ready for an Inheritance?

There are countless circumstances where a potential beneficiary may not be ready to receive and manage an inheritance. For instance, a minor child would not be ready to be in control of an inheritance. Children under the age of 18 cannot sign legal contracts. An inheritance of a minor, without this being properly addressed in your estate plan, would be taken custody of by the court. The court would do this by using something like a custody account, protective order, or even a conservatorship. Whatever way the court chooses, it will likely result in there being less control over how the inheritance will be managed. 

When the minor reaches the age of 18, he or she will usually receive the balance of the inheritance that was held. It will come as a lump sum. While 18 might be the legal age in the U.S., it is still young for a person to accept a sizeable amount of money all at once. Proper money management and sound investment strategies could help preserve the inheritance from being quickly wasted away.

There are also many adults who may not be ready for outright inheritance. There are those who struggle with substance abuse issues, gambling problems, as well as disabilities. There are also those adults who are just not good at managing their finances. There are also many adults who are going through a divorce, who have creditors after them, or who are at risk of getting sued.

Whatever the reason for potential beneficiary’s unpreparedness, you may wish to use a testamentary trust to protect them and the assets you are bestowing upon them.

How Can I Use a Testamentary Trust for a Beneficiary that Isn’t Ready?

A properly crafted testamentary trust can be used in cases where you want to give someone an inheritance, but he or she may not be ready to properly manage a lump sum transfer of wealth. The trust will be managed by a trustee for the benefit of the beneficiary. When you establish the trust, you have several options on how and when you want trust distributions to be disbursed to your beneficiaries. For instance, you can:

  • Give the trustee discretion in determining when distributions should be made and for how much based on the best interests of the beneficiaries;
  • Instruct the trustee to directly pay for necessary living expenses of the beneficiary as opposed to giving them outright cash or property;
  • Make trust distributions conditional on the beneficiary going to college, maintaining a certain grade point average, or refraining from drug use, among other things; or
  • Empower the trustee to use discretion as far as when to stop making distributions when the beneficiary may be misusing trust funds for purposes of things like gambling or drug use (the trustee may begin distributions once again if the problem resolves).

These are just several options to consider, including in the trust document of a testamentary trust with a beneficiary who may be unprepared to maximize and inheritance.

Protecting Your Legacy with a Uniquely Crafted Estate Plan

Everyone’s family and loved ones are different. And, with that comes different needs and concerns. All of this can be accounted for in an estate plan. At Unique Estate Law, we consider the unique needs of you and your loved ones and use that to create a comprehensive estate plan that meets those needs. Contact us today.


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From within Hennepin County Unique Estate Law represents clients throughout Minnesota, including Minneapolis, Edina, Bloomington, St. Louis Park, Minnetonka, Plymouth, Wayzata, Maple Grove, St. Paul, and Brooklyn Park.


9.3Chris Tymchuck

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9.3Chris Tymchuck