Parents typically love all their children equally, but this doesn't blind them to their weaknesses. When it's time to sit down with your estate planning attorney and devise your estate plan, you need to be fully transparent about your proposed heirs' abilities to manage any inheritance you may leave them.
This is a delicate issue, as what parents may perceive as their children's poor financial decisions could simply be radically different lifestyle views. For the sake of argument, let's say that you have an adult child who has demonstrated throughout their lifetime that they are hopelessly inept when it comes to financial management.
Can you provide for your much-loved son or daughter and still put the brakes on their tendency to make bad investments and throw good money after bad? Thankfully, by funding a spendthrift trust for your heirs, you can offer them some protection from their worst instincts.
Spendthrift trusts can also be a safe harbor for funds that your child's spouse might dissipate if given such access. Both your heir and their spouse will be barred from touching the principal of the trust. Your heir will get scheduled distributions which can be disbursed annually, semiannually, quarterly or however you feel is appropriate.
You may wonder how your loved one will react to the structure of the trust -- especially if you have other heirs who are not similarly hamstrung with their legacies. That's why most estate planners agree it's best to discuss your intentions with your spendthrift child or other family member and explain the reasoning behind it.
Some heirs are well aware of their financial failures and may be relieved that the pressure is off them to financially manage their inheritances. However, many others will be angry at the idea of getting disbursements from a trustee as opposed to taking what they see fit whenever they want.
Remember that except in rare cases, you are not bound to leave anyone an inheritance. It's your prerogative to leave a lifetime of wealth to your favorite charity, alma mater or your town's no-kill animal shelter instead of your son or daughter.