Link This |
Email this |
Blog This |
Comments (0)
I am concerned my children will not be able to handle a significant inheritance. What can I do?
September 5, 2007
Traveling across the fruited plains over the years I have encountered dozens of parents who wrestle with this dilemma. Naturally parents want what’s best for their children, which I can appreciate as I am a father of three. Unfortunately, in some cases, parents’ actions do not always align with their heart and their head. As a result, children are often spoiled or enabled to a point where their perspective of life and money is tainted.
When it comes time to address the disposition of their estate, parents wonder if:
- their children will be able to handle a large inheritance;
- their children will be a good steward of what has been given to him or her;
- they have created a “trustafarian” who is content living off of the proceeds of a trust and who is not motivated to do much but party and have a good time.
Consequently, this scenario can have a negative impact on family harmony which is a critical component in successfully transferring the business through the next generation.
To better prepare your children, follow the three steps below to prepare your children for receiving a large inheritance:
- Train your children to be financially responsible as they are growing up: While they are young, teach your children the importance of saving. Make them do chores or send them to work outside of the home and have them open up a checking/savings account. Require them to use part of their savings for something he/she would like to have and balance their checkbook.
- Prior to receiving their first estate distribution, require them to serve as co-trustees whereby they will have an opportunity to learn about the assets they will one day be responsible for managing.
- Stagger distributions. For example, sprinkle their inheritance in five year increments such as ages 30, 35, 40 in the event they squander their initial distribution. There are other benefits to this approach such as asset protection in the event of a divorce while assets remain in trust as well as protection from the claims of creditors.
The key is to be proactive and diligent with your children. After all, isn’t that what children really want anyway?
Next post: How to Assist Your Children in Good Financial Decision Making
Posted by Dave Ciambella on September 5, 2007 | Comments (0)
