Is It Wise or Prudent to Give an 18-Year-Old a Large Inheritance?
The law provides that an 18-year-old is an adult and as such, he or she is entitled to receive his or her inheritance or benefits as a beneficiary outright unless you have a document that provides otherwise.
If a young adult is a beneficiary of a life insurance policy, retirement account, bank account or other asset, the proceeds are entirely his or her property to spend or dispose of in any way he or she wants. If you would like to protect your young beneficiaries until they are mature enough to handle their inheritance, there are several options.
Among the options, is to provide in your will that if a beneficiary is under the age of X (25, 30, 35), the beneficiary’s share of the assets are to be held in trust. You can select a person you trust, who has similar values as you, to be the trustee. Until the beneficiary reaches the age of X, the money can be used for the beneficiary’s care, maintenance, support and education as the trustee determines. When the beneficiary reaches the designated age(s), the trust assets can be distributed to the beneficiary.
With a trust that is created as part of a will, the probate court will appoint the trustee you designate in the will. Every two years, the trustee must file a report with the court, detailing all of the trust transactions.
Some clients find it comforting knowing that there is oversight and supervision of the trustee, especially when the beneficiaries are very young. Other clients do not want the trust transactions to become a public record for the whole world to see. They do not want the trustee burdened with the scrutiny of the probate court. In those cases, the client establish a Living Trust that remains private and is not subject to the supervision of the probate court. Sometimes a custodial account will be sufficient to accomplish your goals. Each family situation is different.
