If you have an adult child with mental health challenges, they may have difficulty managing their own money. How can you ensure that an inheritance will be used wisely? Treva Newton, Tax and Estate planner with TD Wealth, talks to Kim Parlee about making provisions in your estate for children who are struggling with their mental health.
- If you have an adult child who is having mental health issues, you may have wondered how to take care of them and provide for them in your estate. If managing money has proven a challenge for them, how can you ensure that their inheritance is used wisely?
Treva Newton is a Tax and Estate Planner with TD Wealth. She joins us from Victoria, British Columbia for this "Ask Money Talk." Treva, the question is, "I have a child who is struggling with their mental health. How can I provide for them in my estate?"
- Yes, anybody who has a child who's struggling with mental health issues, it's exhausting. And it's very challenging to figure out how to look after them if you're not going to be there. How are you going to make sure that they're going to be taken care of? One of the biggest considerations is ensuring the future for them. And a trust might be able to help them with that.
- What's a trust?
- So a trust is a legal entity that allows somebody to manage property for a beneficiary. So when we're looking at this type of trust, you're looking at being able to appoint a trustee who's able to manage the assets that you leave to a child and ensure that the money's going to be used how it is intended.
So when you're looking at somebody who has, you know, mental health issues-- or even it could be other types of disabilities as well-- you're probably going to look at something called a discretionary trust. What this allows is it's at the discretion of the trustee to how the assets are going to be distributed-- well, given to the child.
So what's going to be used to pay for them? Is it going to be used to pay for a house? Is it going to be used to pay for rent? You can lay out exactly what the things to be paid for. And particularly, if the person has actually disability and pension and is receiving disability payments, you could set up one that's called a Henson trust, which just takes into account the disability payments so that the person can still receive the disability payments and receive some assets from the trust.
- How does one choose who the trustee is of that? Obviously that's a very important position.
- Mm-hmm. Yeah, it can be challenging to choose the trustee for that type of role, particularly because, if you're looking at your child, they're probably going to be-- you know, they're obviously a lot younger. And how long are they going to live for? And if it's set up for their lifetime, which a lot of these trusts would be-- because you want to make sure that they have assets to look after them for their lifetime. That's the reason behind it. You need to make sure that someone's going to be around that whole time.
And if you choose a sibling, well, that can be challenging because you're putting a sibling in a difficult relationship with their brother or sister. They're going to be looking after the finances. There could be some not happiness behind that.
So a lot of times people will choose a trust company to look after that or another professional. If you do choose an individual, make sure you have an alternate in place so that somebody can continue it if that original individual cannot.
- Treva, great information. Thanks so much.
- You're welcome.