As financial professionals, my colleagues and I tend to view news and current events through the prism of personal finance. When Paul Walker, a successful young Hollywood actor, was killed in a car crash our office water cooler talk centered on how his family’s money situation would be affected by his death.
The most insightful comments on this tragedy came from Bill Cibulas, a sharp estate-planning attorney here in Atlanta. Click here for a link to his Linked-In profile. I asked Bill to share his thoughts:
The untimely death of Paul Walker, who is survived only by a 15-year-old daughter, spotlights the importance planning for our children’s inheritance, especially when the estate is very large.
Under Georgia law, a fiduciary may withhold an inheritance from a minor only until age 21. Unless you make other arrangements as part of your estate planning, that’s when the kids will have full access to the money.
Most people aren’t ready at 21 to handle a large inheritance. Access to a lot of money at that age can stunt a young adult’s ambition or enable an ongoing problem, such as substance abuse. I encourage all my clients to take steps to ensure that the money left to their offspring enhances the recipients’ lives. The best way to accomplish this goal is by building safeguards and restrictions into your Will and/or Trust that direct the unencumbered inheritance be distributed to your children only when they are mature enough to handle it.
Wills and Trusts often grant a full inheritance when the heir turns 25-years-old. Graduated schedules are also common. In this structure, an heir might get half of her inheritance at 25 and the remainder at 30 with some funds made available to be used for the health, support and education until the full amount is handed over.
But what if you pick the wrong age? What if there is an alcohol or substance abuse problem? What if your child is a spendthrift, is easily persuaded/taken, or is just not financially astute enough to handle a large sum of money at the age you declared? My suggestion is to allow your trustee the discretion to withhold distributions if such problems arise. The trustee can continue to provide overseen support and comfort to your heir until a time when he/she demonstrates enough responsibility to handle the inheritance. This way you know someone you absolutely trust – a close personal friend or relative or professional trustee — can intervene in case you picked the wrong age to signify maturity.
Let’s hope Paul Walker had made arrangements to insure that his millions will be a blessing and not a curse for his daughter. With a little bit of prior planning all of us can guarantee the same for our children.