When people die without a will, the state’s intestacy laws dictate which heirs will inherit from the deceased person’s estate. Without a will, these heirs stand to inherit outright both personal belongings and money.  Even with a will, a testator can decide which heirs inherit from the estate, but if there is no contingent trust set up for certain heirs, a financial inheritance can adversely affect these heirs. 
 
The following five kinds of heirs are people who probably should not inherit large sums of money outright—either through a will or through the intestacy laws:
 

• Disabled spouses and children with special needs. Spouses who are disabled will, at some point, qualify for public benefits, such as Medicaid or Social Security Disability, as a result of their condition. There is a realistic probability that if these disabled spouses inherit money, their eligibility for public benefits could be jeopardized. Potentially, even a small inheritance could result in the spouse losing the public benefits. Similarly, as with disabled spouses, minors with special needs may also be eligible for certain government benefits due to their condition. With these kinds of heirs, an inheritance may adversely affect their eligibility for certain financial assistance or else puts these heirs in a financially compromising position at an early ag4.
• Minors. Minors cannot inherit from an estate until they are legal adults. And for good reason, because minors are not usually in a position to handle money responsibly.  Without prior provision for a trust for underage beneficiaries, any inheritance will have to be paid to the clerk of court with no guidelines for how to spend money to assist the minor.
• Heirs with creditors. Certain kinds of people are known credit risks. These are people who have filed for bankruptcy before. These are people with poor credit ratings. These are people who may own financially adverse businesses like construction companies. Spendthrifts are heirs who have no business inheriting large sums of money outright due to the potential for the entire inheritance to be lost due to reckless spending.
• Heirs with dependency problems. People who are addicts and dependent on drugs or alcohol are generally not ideal candidates to inherit money outright. Potentially, an inheritance could be spent in a matter of weeks or days by some addicts.
• Children with rocky marriages. If a testator’s adult children are in troubled marriages, a new inheritance might be incentive for the child’s spouse to consult a divorce lawyer and lay claim to the inheritance. Here, there is potential for the inheritance to be split with a child-heir’s ex-spouse.

While these kinds of heirs may not be ideal candidates to inherit money outright, they should not be written out of an estate plan entirely. The best way to protect an inheritance for these heirs would be through a well-drafted trust based on the circumstances.
 
A trust permits the trustor to control the purse strings by setting forth certain criteria for the heirs—called trust beneficiaries—to inherit or receive money. Trusts can be included in a will as a contingency or can be executed while the trustor is alive.
 
Well-drafted estate planning documents and a consultation with an attorney who specializes in elder law or estate planning can address specific concerns with heirs.

Andrew Olsen is an attorney in the CSH Law Elder Law Practice Group in Wilmington, NC, where he practices in the areas of elder law, estate planning probate, guardianship, alternative dispute resolution, estate and trust litigation, special needs planning and veteran’s benefits. To contact Olsen, call (910) 777-5733 or email him at [email protected].