As a parent, you put in a lot of hard work to earn, save and invest your money to create a withstanding inheritance for you children. But some parents worry that their children will blow through it before realizing the value of what they have received.
This is a common fear among parents who want to leave their children a parting gift. According to a study done by WealthCounsel, 35% of those forming estate plans, are creating plans to ensure their heirs don’t mismanage their inheritance.
How can you protect your beneficiaries from themselves? Follow these four steps.
- Prepare them for their inheritance: Talk to them about what’s in their future instead of them having to hear it through the reading of a will.
- Provide practice and learning opportunities: Pass down some income to them while you’re still around and at a time they will still listen to your guidance on how to manage their inherited assets. Also, suggest they see a financial adviser or take a financial planning course to further learn how to manage and invest their money. You can provide your child a certain amount of money as a gift without having to report it to the IRS (this amount can vary.)
- Use a trustee: After crafting a trust, you can appoint a trustee who will follow your directions to the letter on how to manage your assets, including how much and over what period your inheritance should be doled out. This way, your money will be protected and watched over for a longer period.
- Create stipulations: A trust allows you to attach some requirements that your heir must meet before they can receive their inheritance. This could cause levels resentment but sometimes is needed to feel secure. These stipulations can range from earning a degree to numerous other conditions.
Protect your estate by planning and preparing accordingly.