“Say not you know another entirely till you have divided an inheritance with him.” -Johann Kaspar Lavater
Leaving money to the family—especially your children if they’re financially irresponsible—is different than a business transaction. It’s chock full of emotion, and if you don’t plan carefully, heated arguments may ensue which could squander your hard-earned money in the process.
Good thing that’s not the only way to leave an inheritance. Here are alternate options you can write into your estate plan to maintain a little control over your assets, even when you’re gone.
Option 1: Installments
You can choose to distribute funds in installments of a set amount within an allotted amount of time. For example, you can give funds when your child turns 25, 40, 50, and so on.
Pros: If your child isn’t financially mature enough to handle a large sum of money all at once, this ensures it won’t be foolishly spent–at least not all at once.
Cons: If you live for a very long time, your children may also live past the allotted ages for distribution, or in the worst-case scenario, not live to the age set in your distribution.
Option 2: Distribute some of your funds while you’re still alive
You may choose to give some of your assets while you’re still alive. Doing so may indicate how the funds would be spent in the future.
Pros: You can see your hard-earned money pay off by helping a grandchild go to college, helping with a wedding, or even getting a business idea off the ground–and you get to witness it all.
Cons: Of course, money spent now is less saved for the future.
Option 3: Trusts
Trusts are a great way to still give your hard-earned assets to your beneficiaries without actually giving them access to the entire amount.
Pros: Assets in a trust can continue to provide for a child with special needs or who may become ill or incapacitated later. Trusts protect funds from creditors, current and ex-spouses, lawsuits, and even protect the beneficiary from themselves with irresponsible spending.
Cons: If you think a trust may inhibit a child from earning his/or her income and may become too dependent, you can set up their trust income to match the income they make on their own.
Of course, you want your children to be provided for and financially cared for long after you’re gone. Still, it’s beneficial for you and for them, to ensure you’re honest about each of your children’s personalities and ability to manage money.
Not sure how to sort this all out in your will and estate plan? A professional estate planner can guide you through making the best decisions for your family.