Some parents in Nevada who are creating an estate plan might be concerned about whether their adult children will be able to handle a sudden influx of wealth. It is not uncommon to hear stories about lottery winners or other people who mismanage their money and end up filing for bankruptcy, and parents may wonder how they can prevent this from happening to their children.
Experts encourage parents to talk to children about money, but this may not be sufficient. Many parents use what is called a spendthrift trust or an asset protection trust. This type of trust can be created while a person is still alive or at the time of the person’s death. Usually, one or more trustees is put in charge of deciding when distributions will be made.
In addition, the trust could be set up so that distributions are made to the child at certain milestones, such as on significant birthdays. However, a trust that allows this may not provide as many safeguards. A trust can be created that protects assets from creditors and even from a child’s ex-spouse in case of divorce. Trusts can be powerful documents, but they are also complex, so a person may want to consult a professional about creating one.
Trusts have many other uses as well. For example, if there is a relative who has special needs and receives government benefits, that person might lose access to benefits on receiving an inheritance. However, a special needs trust could be set up to provide support to the relative without endangering access to benefits. The relative’s rent or other expenses can be paid directly from the trust. A person might also want to talk to an attorney about trust planning with a charitable trust, which may reduce estate taxes.