Dear Mr. Premack: My only son is not very reliable. He is divorced, and
his ex-wife has custody of their son. I’ve made a very difficult decision
to leave my estate to my grandson instead of to my son. I do not want his
ex-wife to be able to take the money. What do I need to do to be sure that
the inheritance will be used for my grandson’s college and to help him
start in the world. Right now he’s only five years old. – W. H.
Texas law allows you to select any people or charities to receive all or
part of your estate. Your son may be an “heir at law” but that status is
secondary to the decisions you pronounce in a legally valid Will. Your
grandson is also a natural target of your generosity, but his age and your
desire to keep his parents out of the control loop requires some detailed
The option that gives you the most control over
the inheritance is to include a testamentary trust in your Will. You
select a manager of the inheritance (a trustee) who is willing and
capable. Since you do not want to select your only son or his ex-wife at
Trustee, do you have any other trusted individuals (friends/relatives) who
could act as Trustee? If not, you can appoint a bank trust department to
manage the inheritance.
The Trustee is required to follow any
instructions issued by you in the trust. Thus, you must decide exactly
what benefits your grandson will receive and when he will receive them.
For instance, while he is under age 18 his parents have the legal
obligation to provide for his health, education and support. You could
therefore state that the trust should be used only in case of emergency,
or just for special medical needs, or for summer camp.
hope that your grandson will go to college. The terms of the trust can
state that the Trustee must expend funds for his tuition, room and board,
fees and books. If he’s not college bound, the trust can allow funds for
vocational education or other career training. Educational expenses are
likely to consume any income produced by the trust while still providing
your grandson with a substantial benefit.
Eventually he will
become an adult. You have to decide how old he should be before the trust
ends. When it ends, all of the funds in the trust must be given to your
grandson, so you want to be conservative when guessing about his maturity.
It is very difficult to know what he may be like as an adult when the only
evidence you have is his behavior as a five-year-old. Consequently, ending
the trust when he turns 21 may be too early for his education and
development. Consider age 25, or 30, or even 35 if his best example is
likely to be your son (who, you say, in unreliable).
grandson has finished his formal education and until the trust is
distributed to him, he need not be entirely cut-off from help. You can
instruct that any income earned by the trust fund should be paid to him on
a monthly or quarterly basis. You can also instruct that the actual
inheritance (the trust’s principal) may be spent for certain needs he may
have – but only if the Trustee decides to do so, never on demand from your
Those discretionary distributions may be used to help him
buy a car, to make a down payment on a house, or to start his own family.
He’ll have to realize that the Trustee will exercise judgment in whether
to make those distributions, much like you would have made those decisions
if you were still alive on that future date.
testamentary trust gives you great flexibility (you can dictate almost any
terms you find to be appropriate). However, with flexibility comes
complexity. Your lawyer will charge a higher fee to prepare a Will
containing a testamentary trust compared to one with simple gifts to
adults. The trust will involve all of your hard-earned assets, so it is
worth the time and expense to protect those assets by hiring a certified
attorney to draft the document for you.