One of the perennial issues high-net worth families worry about is how they can pass their wealth to the next generation without spoiling their kids or destroying their drive or ambition.
If you are afraid your heirs may become spoiled by their inheritances, your fear is justified. Many people are apprehensive when deciding how to pass down their estate for this very reason.
When people suddenly receive a lot of wealth, one of their first instincts is to use it to buy all of the things they want but previously could not afford. While it might be okay to indulge in one or two purchases, the spending rarely stops there. Instead, it often continues until the money is all gone. Other people will use the money so they no longer have to work again. They will prefer to live off the inheritance.
The Globe and Mail recently published an article about what you can do to make sure your children are not spoiled by an inheritance. The article, titled “Three ways to pass your wealth to your children without spoiling them,“ includes these ideas:
- Teach Them Values – Tell your children how you earned the money and how hard you had to work for it. Instill the value of hard work in your children.
- Delay the Transfer – Plan your estate so your children inherit the bulk of the assets when they are old enough to be established in their own careers.
- Think Outside the Box – There might be unusual strategies you can employ to make sure your children do not get spoiled. The article mentions one plan that puts money in a trust and gives it to the children as a dollar-for-dollar matching of their own salary.
Inheritance does not have to spoil your children. If that is a concern, then talk to your estate planning attorney about how you can set up your estate to minimize the risk. You might be surprised about the many options your attorney can provide.
Reference: Globe and Mail (August 22, 2014) “Three ways to pass your wealth to your children without spoiling them“