You may worry whether your beneficiaries will use what you leave them in your estate wisely — or whether they might squander it rapidly. As we discussed in a recent post, you can use conditional trusts to exercise some control over this. For example, you might make graduating from college a condition of receiving the inheritance for some (or all) of your heirs.
Before you rush to set up a conditional trust, however, it is worth remembering that conditional trusts can prove to be problematic. Any decision you make will be based on assumptions about the future, as you cannot truly know how a beneficiary’s life will play out. As you have probably learned from experience, assumptions often turn out to be wrong.
Many things could happen
Let’s use the example of making an inheritance conditional upon your grandchild finishing college. It’s something you believe your grandchild will be able to do if they put their mind to it, so you want to put a pot of money on the other side to entice them to stick with the course and work hard.
What would you think if they left college and opened their own business, something that you would have fully supported had you still been alive? What if they decided that they wanted to be a stay-at-home parent, which is another path you would have entirely endorsed? What if they were hit by a drunk driver while walking to classes, and their injuries made returning to the classroom too much of a challenge for them? What if they developed a serious medical condition that left them disabled?
As you can see, all sorts of things could occur that you might not predict. You cannot amend the terms of your trust once you are gone, so be sure to think carefully before making an inheritance conditional. Legal guidance can help you examine alternatives that may suit your needs better.