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  • Amy Privette

Dearly Beloved: The Six Heirs Who Would Benefit from a Protected Inheritance

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Whether we want to admit it or not, there are some people in our lives who may not be the best candidates to receive a direct inheritance of our assets. By direct inheritance, we mean an outright inheritance, free of any type of guardrails or structure. A direct inheritance is typically what heirs receive via your Last Will and Testament or through intestate succession (the state's plan that applies when you have no plan of your own). For example, a clause in a Will saying, "I give 50% of my estate to each of my children," is a direct inheritance. Once probate is finished, your child will get a check for whatever 50% of your estate comes out to be. Whether the check is for $100.00 or $100,000 or $1,000,000, it doesn't matter. With a direct inheritance, your child gets a check with no strings attached.

For some loved ones, however, a direct inheritance is unwise and perhaps even dangerous. For these heirs, it may actually be more beneficial to them, due to their circumstances, to have a protected inheritance. By protected inheritance, we mean an inheritance that has careful guardrails placed around it, one that incentivizes desirable behaviors or achievements, one that allows money to flow to the heir but not in such great sums that it's the equivalent of drinking from a fire hose. We mean one that is more likely to be administered via some type of trust.

Let's look at the six "dearly beloved" heirs who would benefit from a Protected Inheritance:

  • A disabled spouse and children with special needs. A spouse who is disabled may qualify for or already be receiving government benefits, such as Medicaid or Social Security Disability. These benefits are typically income-based. Thus, if your disabled spouse receives a direct inheritance from you, your spouse risks losing their benefits. Similarly, minors with special needs may also be eligible for or receiving certain government benefits. Again, these benefits may be disrupted (or even discontinued) if your child receives a direct inheritance.

  • Minors. Under current law, minor children cannot inherit directly from an estate until they reach the age of majority, The age of majority in North Carolina is 18. If you leave an inheritance to someone under the age of 18, that inheritance will be paid to the court. The court will hold on to and maintain the inheritance until such time as your heir turns age 18. If you'd rather not have the court in charge of your heir's protected inheritance, then you should set up a trust.

  • Young Adults. Even once your heir has reached age 18, you may question his or her ability to handle money responsibly. Much has been written about the effect COVID-19 has had on children's development in many areas. That should lead you to consider whether an 18-year-old today is the same as an 18-year-old 5 years ago or 10 years ago. Lack of financial maturity or sophistication may be a sign that a protected inheritance is the way to go. There's no rule that says you have to give your heir all of their inheritance at once. With young adults, it may be more appropriate to stage it out such that they receive money at different times during their lives.

  • Heirs with creditors. Financial woes are not unique to young adults. You may have loved ones in their 30's, 40's, and 50's who have filed for bankruptcy, who struggle with low credit scores, who use their Visa credit card to pay off their American Express, or who simply spend every cent they get and more. If you do not want your assets to be frittered away due to frivolous and reckless spending, then consider leaving a protected inheritance for these heirs.

  • Heirs with dependency problems. Addiction knows no boundaries. It does not matter how old you are, how educated you are, or how wonderful a person you are. Still, heirs who are battling addiction issues or who struggle with alcohol or drug dependency issues would certainly benefit from a protected inheritance. If you give a direct inheritance to an heir with a substance abuse problem, the best-case scenario is that they spend through their entire inheritance in a matter of weeks. The worst-case scenario is that they cause irreparable harm to themselves or others.

  • Heirs with rocky marriages. If your child's marriage is in trouble and the writing is on the wall, so to speak, then a protected inheritance would be helpful. You could place guardrails around your child's inheritance to prevent it from being divided with his or her ex-spouse as part of a divorce proceeding or being counted against your child in an alimony case. However, you should also consider that your heir may need the inheritance to pay for a good divorce attorney and that without a direct inheritance, they may be forced to stay exactly where they are.

A protected inheritance is not a punitive measure. A punitive measure would be to strip the heir of his or her inheritance entirely. Rather, a protected inheritance is a loving way to give your heir what you want them to have in a way that will not cause unintended harm. What's love got to do with it? Everything!

If you are interested in setting up a protected inheritance for your dearly beloved heir, reach out. We can help you navigate your heir's specific situation. It's the loving thing to do.

Phone: (919) 678-5761 Email:

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