Based on a 2013 U.S. Trust Insights on Wealth and Worth study of adults with at least $3 million in investable assets, only two in five wealthy parents, or 42 percent, agree strongly that their children are or will be well-prepared to handle their inheritance. But few wealthy parents believe their children will be mature enough to handle their wealth before the age of 25.
Though the type of trust that Carter-Williams chose is not known, tax expert and attorney Kelly Phillips Erb said Carter-Williams’ arrangement was an “unusual” arrangement for a lot of reasons, including the involvement of his parents in helping create the trust.
“Once you’re no longer a minor, it’s difficult for your parents to control your wealth. It’s not theirs. It’s his, no matter the intentions or if he’s living in their house,” she said.
The stories of young celebrities going broke or owing money to the IRS are not new.
In October, singer Aaron Carter, 25, the younger brother of Backstreet Boys member Nick, filed for bankruptcy. The travails of Lindsay Lohan, 27, and her courtroom drama often involved her need to support her family financially.
“Even if an athlete has a million dollars today, it has to last until you’re 65,” Phillips Erb said, adding Carter-Williams will be 27 in five years, which can be considered old for an athlete.
Phillips Erb said her “gut” was that Carter-Williams and his parents created the trust to protect his money from himself.
A self-settled trust would have certain protections but would have to have been blessed by a court, she said. A standard irrevocable trust is typically created for estate planning purposes. These can be broken but there would be tax consequences.
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