The Moneyist: My financially reckless friend lives in the family home. Can we prevent her sister from selling it after their mother dies?

For the past few years she and her college-age son have lived with Mary’s mother. Mary’s mother is 89 and in declining health. Eventually she will pass away. At that point, Mary’s sister will want half of any inheritance, including half of the value of the mother’s house.

In another response, you suggested a “life estate.” Can Mary’s mother grant Mary a “life estate” to live in the house? I’m not certain Mary could even afford the taxes and upkeep on her mother’s house, even if she remained there. I am looking for any way to keep Mary from being homeless.

Jenny

You can email The Moneyist with any financial and ethical questions related to coronavirus at [email protected]

Dear Jenny,

You’re a good friend to look out for Mary. I applaud your willingness to do what you can, and your obvious concern that your friend not become homeless. As you say in your letter, there is only so much you can do to help someone who is not always willing to help herself.

Yes, Mary’s mother could grant her a life estate, enabling her to live in the house as long as she lives. As you say, there’s no guarantee that Mary will change her ways. Tread carefully: Giving her such an opportunity may even encourage her to be more reckless than she has been in the past.

Her mother could put the house in a trust to prevent Mary or her sister from selling it, and also outline some conditions for Mary if she wishes to continue living in the house: for example, that she pay the real-estate taxes and other expenses necessary for the upkeep of the home, so it does not fall into disrepair.

Czepiga Daly Pope & Perri, an estate-planning law firm with offices in Connecticut, covers some options for setting up a trust for an irresponsible adult child. “Assessing your children’s level of financial responsibility is a critical component of making effective choices,” it says.

Among the options outlined by the firm: “Annuities: This is a trust that distributes the inheritance over time based on a payment schedule that you deem appropriate. Typically, payments are made in equal amounts each year.” Payments may depend on achieving certain goals.

“Incentive Trust: This term applies to any trust in which there are conditions the child must meet in order to ‘earn’ distributions,” Czepiga Daly Pope & Perri adds. “Many parents tie distributions to the attainment of educational goals, but you can be as creative as you like.”

“Age-based Trust: A more traditional route to take is to set distributions based on the child reaching certain ages.” And finally: “Income-matching Trust: In this case, annual distributions are made in an amount matching the child’s earned income or a percentage of that income.”

But trusts, wills and even friendship can only go so far. Unless Mary decides to change, history is likely to repeat itself, and owning this home with her sister is likely to become a headache for both of them, especially for her sister. She may require tough love, home truths and a financial adviser.

Preferably in that order.

The Moneyist: My father’s ‘domineering’ third wife turned our dad against us. His divorce decree said he’d leave us his house, but he put it in an irrevocable trust

Hello there, MarketWatchers. Check out the Moneyist private Facebook FB, -0.32%  group where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.