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Placing Conditions on an Inheritance in New York: What You Need to Know

Attorney explaining the documents to his client

While many people want to leave their estate to be inherited by their loved ones, sometimes they cannot help worrying about how responsible their heirs will be with the money.  What if they were to pass away before their heirs were old enough to responsibly manage their inheritance?  How would their inheritance be handled? Another important question is at what age do you think your children, or other heirs, would be ready to inherit? For some, perhaps they may want their heirs to inherit younger, but for others, a staggered distribution throughout the heir’s twenties may be even better.

In New York, conditions can be included in a will that help to control not just who gets to inherit, but how and when they can inherit.  Such conditions can help ensure that the deceased’s hard-earned money will not be spent prematurely or irresponsibly.  

In this article, we will address some of the conditions that can be placed on an inheritance, and how those conditions can keep assets safe before heirs are ready to inherit. An estate planning attorney can further explain the conditions of inheritance you might want to include in your will.

Why Might Conditions Be a Good Idea?

Placing conditions on an heir’s inheritance can benefit both the person who will eventually pass away and their heir.  Conditions help ensure that the assets:

  • Will be put to good use
  • Will be safeguarded until the heirs are ready and legally allowed to access them.

Such conditions are especially beneficial when minor children are involved.  Children under the age of 18 are not allowed to inherit. This means that if someone were to pass away while their children were still minors, those children would not be allowed to access an inheritance absent the permission of their appointed guardian, unless other arrangements are made in the deceased’s estate plan.  

A will can state additional conditions upon which the children can inherit. For example, conditional inheritances may be a good idea when an heir requires government assistance.  

With government programs such as Medicaid, the recipients must be below a certain income and net-worth threshold.  As a result, a large lump-sum inheritance could disqualify that heir from receiving government benefits or worse yet disqualify them from continuing to receive benefits that have already been approved.  Putting conditions on their inheritance could allow for the assets to be distributed in a specific way that will not cause the heir to lose any government assistance they are receiving.

What Types of Conditions Can One Include?

Conditions frequently are age-based or milestone-based.  For example, a condition could state that an heir may inherit on their 25th birthday, when they graduate from college, or when they get married.  

A condition can be anything that is not illegal or against public policy. That said, it’s always best to structure an estate plan so there is no ambiguity and any conditions are clear, both in terms of what those conditions are and when they are satisfied.

There is another estate planning concept, called a testamentary trust, that allows a trust to be created through a will. A testamentary trust is a clause in a will that allows for separate trusts to be created from a will, which would allow for more conditions and control to be imposed over the inheritance. This concept can be effective in holding an inheritance and distributing it over the course of a few years. An example of how this could work is that a testamentary trust could state that you want any minor children named in your will to inherit one-third of their inheritance at twenty-one, another one-third at twenty-five, and then the last third at twenty-seven. While this can be a useful tool, it is not always included in a will and it does not necessarily offer the breadth of conditions and control that may be available through a living trust. 

A living trust is an extensive and thorough legal document that is more specifically geared towards conditional inheritance and the control of the inheritance in the meantime. For those who believe they may want there to be more control over the inheritance, or a more complex distribution schedule, it may be best to consider a living trust. Of course, we recommend you speak with an experienced estate planning attorney to help decide which course of action may be best for a particular situation.

What Is a Custodial Account?

A custodial account is an account that stores assets until a minor beneficiary reaches the age at which they can inherit.  The money in the account is monitored by a trusted individual called the custodian, who is chosen by the owner of the estate.  

When the owner of the estate dies, the funds in the custodial account can be accessed by the surviving parent or legal guardian of the child for appropriate child care expenses.  The custodian is tasked with approving or denying requests for the funds.  The custodian has a legal duty to approve reasonable requests and deny unreasonable ones.    

A custodian can be named to oversee inheritance assets such as:

  • Cash
  • Investment accounts
  • Life insurance money
  • Retirement accounts.  

The cash from these assets can be fleeting and easily wasted, which makes naming a custodian a wise choice in some situations.  

Naming a custodian for other assets, such as a home, may or may not be an option.  To best understand the options that are available for a particular asset, we recommend speaking with an estate planning attorney.  

What Is a Living Trust?

A living trust allows the owner of an estate to impose the same conditions that they could in a will, but the trust itself can hold the inheritance until those conditions are met.  

A living trust can consolidate some or all of the estate owner’s assets that will be left behind and name someone to oversee them.  A living trust:

  • Gives the estate owner a lot of flexibility to move assets in or out of the trust during their lifetime
  • Lets them dictate how they want those assets to be distributed when they pass away, even if such distribution is to occur many years after their passing.  

A trustee oversees the trust upon the estate owner’s passing.  All of the assets that an heir stands to inherit can be kept in the trust, monitored by the trustee, and distributed when any conditions are satisfied.  

Similar to a custodial account, the surviving parent or legal guardian of a minor heir can access the heir’s inheritance if it is in a living trust with the permission of the trustee where the parent themselves are not fulfilling this role.  Similarly, if the heir’s caretaker needs the inheritance for appropriate child care expenses, they can request funds. Like the custodian of a custodial account, the trustee must approve reasonable requests and deny unreasonable ones.

Probate and Living Trusts

Another issue that is sidestepped when creating a living trust is probate. The probate process for wills in New York can easily last more than a year, thus delaying distribution. It is also worth noting that the longer it takes for probate and for distribution of the assets, the longer the executor and other agents named in the will will have to manage the assets in the estate. Tasks such as paying applicable taxes, maintaining properties, or perhaps renting a storage unit for certain items, must continue to be done. This will create a much longer, and longer-lasting, to-do list for the executor. In short, the extensive probate process, especially the probate process in New York, can create a much bigger headache than there would be from a living trust, which can largely bypass probate and therefore cut down on the time the executor or trustee would have to spend maintaining and managing the assets.

However, if a trust has been created, the trustee would immediately have the authority to begin handling (and possibly distributing) the assets held in the trust. With a will, the probate process would slow everything down, making heirs wait for months or longer for their inheritance.

To fully weigh the benefits of a will versus a living trust, we recommend speaking with an experienced estate planning attorney who can help one explore both options.

Rosenblum Law Can Help

Rosenblum Law has an experienced estate planning team that can help you create the estate plan that best meets your needs.  From explaining the benefits and limitations of an estate plan, to carefully crafting the language to accomplish your specific goals, Rosenblum Law will help you every step of the way.  

Knowing how to best bestow your assets onto the next generation can be a confusing process.  Having a knowledgeable attorney in your corner can make your experience considerably easier.  To understand how to best accomplish your estate planning goals, and for a free consultation, call Rosenblum Law at 888-235-9021.

At your consultation, you will be able to speak with a member of our experienced estate planning team that will be happy to answer any questions you may have about this process. Whether you are deciding between a will or a trust, or trying to determine how to best structure your distribution schedule, meeting with Rosenblum Law can help provide some clarity. Do not hesitate, get your questions answered and schedule a free estate planning consultation now.

Attorney explaining the documents to his client
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