I’m Worried About My Child Squandering Their Inheritance
Estate planning is an opportunity to protect your assets for your children, but what are we protecting them from?
What would happen if you were to give all of your money to your children today? What would they do with it? A Key Private Bank study found that the average inheritance is fully consumed within 17 months, usually on cars and expensive vacations. An inheritance is often viewed as a windfall, like winning the lottery. People don’t look at the long-term benefits of receiving an inheritance, leading to poor financial decisions.
What happens if you have a child with a substance abuse problem or gambling issue. You do want to provide for him or her but leaving a lump sum inheritance would very likely have dire consequences. Disinheriting that child is not the answer.
In all of these situations, you can provide for your children in a way that distributes assets to them over time, rather than in a lump sum. When you plan this way, you protect the assets and help ensure that you are providing for your children when they need it most, thereby providing them with long-term financial stability.
Are you worried about your child losing a portion of their inheritance in a divorce? What about other unforeseen financial circumstances that your children may experience such as:
- a business deal gone bad,
- a malpractice suit against them, or
- a foreclosure on their home where the bank goes after them for the deficiency?
Most wills and trusts distribute everything outright to the children. However, beneficiaries who inherit assets outright (i.e. handed over to them at your death) risk losing the inheritance because those assets are fully exposed to the beneficiary’s creditors, including a divorcing spouse. With some proper planning, assets can be protected well into the future. Let’s be clear, your children will still have access to and benefit from their inheritance, but their creditors won’t.
Find out more about protecting your assets for your children and a few other AVOIDABLE Surprises that DERAIL even the best estate plans by downloading our free report: