According to estate planning attorneys across the country, more and more parents are opting to make their heirs wait until they are older before they are able to collect their inheritances. Whereas it used to be common practice to make children wait for the liquidation and distribution of trust assets until they were 18, 21, or perhaps 25, it is becoming more common to make them wait 10 or more additional years, until age 30 or 35.
The reasons for doing so are various, including the fact that children are not responsible until later. Indeed, major life events like leaving home, beginning a job, marrying, buying a house and having children all now happen later, on average. Since the recession, more and more parents have also taken in children to help support them during their post-secondary education or even during their initial years of marriage.
Some attorneys say that there is a prevailing assumption among baby boomers that their children will waste their inheritances if they were to be given it right now. A variety of estate planning tools are being utilized to address these concerns, including setting up trusts, naming third-party trustees to manage their bequests and delaying the age they are able to receive the assets.
One of the benefits of keeping assets in trust for a child is that those assets may be protected from creditor claims, since the child doesn’t actually have control over those assets. Of course, there are hazards to be avoided in making children wait. Some parents may decide to make their children wait until they are 35- or 40 years old, which can lead to resentment.
Whatever approach parents take to passing on wealth to children, it is important that they understand the benefits and drawbacks of that approach alongside other possible approaches, and that they are clear about what will work best in their situation.
Source: Financial Post, “More heirs wait as wills dole out estate money slowly,” Chris Taylor, June 13, 2013.