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Can a trust keep kids from wasting your savings?

Parents often worry that children will waste their fortunes. Studies have shown that even massive amounts of wealth are sometimes gone just a few generations later.

This can be an issue when doing estate planning. One man, for example, said that he had four children. Two of them were responsible, wise adults and he had no problem giving them their money. The other two, though, "never grew up." He was worried they'd blow the money on needy friends and other such issues.

Naturally, he didn't want the money he'd worked so hard to save up for them to be thrown away on things he didn't approve of. He said he wanted it to be used on health needs, education, and other such necessities.

There are ways to do this without cutting the two immature children out of the will entirely, as some parents are tempted to do. Instead, a trust fund can be used. Money can be put into the fund and the terms of the trust can dictate that it's only to be used for education.

In some cases, the children never even see the money. The financial institution or trustee that the parent selects will simply get the tuition bills, take out the proper amount of money, and pay those bills directly. This way, the child does have financial support, but the parent still controls how that money is used.

When setting up a trust, make sure you know exactly what steps must be taken and how it has to be written up so that nothing but your exact wishes can be carried out. As a parent, this gives you the final say, even if you're not around to work with your child on every decision.

Source: Credit, "How Can I Keep My Kids From Wasting Their Inheritance?," Karin Price Mueller, accessed Oct. 28, 2016

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