They weren’t happy. Of course they weren’t happy. But they weren’t supposed to be happy, they were supposed to be protected. And as an attorney, that’s what I had to get across to them.

“It’s my money, and you better give it to me now!” nineteen year-old Marci said, her fair complexion turning red. “I don’t care what’s in that stupid trust. My grandfather wanted us to get the inheritance my mother should have gotten, and that should be the end of it!”

“What my sister should be saying is that we really could use the money now,” Marci’s twenty-two year old brother Mark said a little more calmly. “My grandfather did want us to get our Mom’s inheritance since she died of cancer six years before Grandpa died. He told us we would split half of the estate with Uncle Roger. So why aren’t we getting our money now?”

Of course, Uncle Roger was in the room as well. He wanted for me to explain things to his niece and nephew, and hopefully they would see things a little more reasonably if I were the one to tell them.

“Yes, your grandfather wanted you to eventually inherit the half of his trust that would have been your mom’s,” I said maybe a little too sternly. Then I emphasized “eventually.”

They started to look a little intimidated. That was actually a good sign. Their grandfather was my client, and we had made the changes to his trust a few years ago to actually put in greater protections for his grandchildren because he didn’t like the way things were going with them. I saw from the minute Marci and Mark sat down that we had done the right thing.

“I worked with your grandfather to make sure if anything happened to him that you didn’t get that inheritance too soon,” I said leaning in. “Or at least until you proved yourselves. Marci, last I heard you were accepted into four top notch colleges only because your father had to constantly push you throughout high school to get good grades. Now that your grandfather passed on and you are legally an adult, you passed on college and don’t have a job because you expect your inheritance to pay for everything.”

“And Mark,” I said turning to him. “You’re situation is not much better. You dropped out of college after your grandfather passed on, and now you’ve had six part-time jobs in the last five months with no real career path in sight.”

“You get your inheritance when you turn forty,” I said. “BUT, your uncle is in charge of your inheritance until then. He is offering to use that money to help you both complete undergraduate degrees, and if you do that and become gainfully employed he will distribute a quarter of your inheritance early. If you choose, instead of a full-time job you can enroll in a Master’s program and use your inheritance to help pay for that. When you get that degree and become gainfully employed, he will then distribute another quarter to you. The rest you get at forty.”

They both sat back, deflated.

“So what’s it going to be?” I asked. “Back to school, or working minimum wage jobs for the next two decades?”

Researchers at Boston College have determined that parents of baby boomers will leave as much as $27 trillion to their heirs, and the baby boomers themselves are expected to leave $30 trillion in the next 30 to 40 years. All that money is going somewhere, and much of it is going to children or young adults who are inexperienced in managing money. The sudden windfall becomes “free money.” And experts caution that “free money” is much more likely to be squandered than earned wealth.

Think about that. We hear all the time about lottery winners who somehow manage to spend away their entire jackpot, and these are typically older adults who should know better. What happens when a young person receives a sizable windfall? How is he or she expected to avoid the temptations of indulging and squandering until it’s all gone?

Wait to Tell the Child about the Inheritance
The easiest way to prevent a child from squandering an inheritance, particularly if the inheritance is left when the child is young, is to simply not tell him or her about it. In some cases, simply waiting until a child has reached 30 or 35 before telling him about the inheritance can help ensure he’s capable of handling the windfall. By that age, a child has typically gotten through college and settled down into a career. If all of that can be accomplished before the child knows about the funds, they have already begun to learn financial management and are in a better position to handle it responsibly.

Give Access to the Funds in Gradual Increments
An alternate strategy involves giving the child access to the funds in gradual increments, which provides a built-in learning curve and can help prevent your child from squandering the entire inheritance if he or she seems inclined to make poor financial management decisions. Maybe you give the child access to 1/3 at 30, another 1/3 at 35, and the rest at 40. Slow distribution of assets gives your child a chance to learn how to manage the funds, instead of squandering the entire amount upon receiving it at a young age.

These age restrictions can also provide the opportunity to put incentives in place for the child. Maybe the 1/3 given at 25 can be given early upon graduation from college, the second 1/3 given at 30 can be given early upon graduation from graduate school, and the final 1/3 given at 40 can be given early upon earning a doctorate. Slow distribution of assets gives your child a chance to learn how to manage the funds, instead of squandering the entire amount upon receiving it at a young age. At the same time, alternate methods of proving maturity that you wish can accelerate the inheritance.

Make the Child a Co-Trustee at a Certain Age
In certain tax and lawsuit protection strategy trusts, i.e. Beneficiary Trusts, the child becomes a co-trustee when he or she reaches a certain age. The other co-trustee is typically a trusted family member, a friend, or even a corporate trustee, such as a trust company. The co-trustee can help keep an eye on things, and actually has to disburse any funds so if the child seems to be spending irresponsibly they can cut back on the funds.

When protection from bad decisions, lawsuits, or even potential divorcing spouses is a concern with multiple children, it’s common to have siblings then take over co-trustee duties for each other’s trusts when the youngest child reaches a suitable age. This way the other protections stay in place with siblings being a “check and balance” on each other’s trusts.

Tools to Prevent Unwise Spending
There are a number of tools that parents can use to protect an inheritance if they’re concerned about the potential for unwise spending. These tools include:

• Provisions in your revocable living trust that put limitations on distribution of funds, including when your child can receive funds, with special allowances for expenses like buying a house or paying for college left in the discretion of your chosen trustee
• Advanced planning in IRA trusts including provisions to govern when the child receives funds or how much the beneficiary can withdraw
• Asset protection trusts, spendthrift trusts, and Beneficiary Trusts, which provide a fund for the maintenance of the beneficiary without giving the beneficiary direct access to the assets in the trust

The right tools for your family may vary depending on the size and nature of the inheritance that you’re trying to protect and the behavior you anticipate from the beneficiary. You could create a more or less protective trust, depending on how responsible you expect your child to be with the funds. In cases of drug addiction or substance abuse, it’s possible to shelter the inheritance substantially while still providing for the care of your child.

Work with a good estate planner to discuss your needs, and create the right provisions and plan to protect your child’s inheritance.