One of the biggest concerns that people with considerable assets have when they develop their estate plan is whether their children will be able to deal with a sudden influx of wealth responsibly. Even parents who know their children won’t blow their inheritance on drugs, gambling or a fleet of Maseratis are smart to consider the effect of a large inheritance on their adult children.
Whatever the amount of the inheritance, if your heirs are not prepared to deal with it, they could easily mishandle it or lose it completely. While you likely don’t know the precise value of the assets you’ll be bequeathing to your child, once you’ve finished developing your estate plan, you’ll have a pretty good idea. You’ll also know what combination of cash, investments and property they’ll be inheriting.
How will the inheritance change your child’s life?
While you can’t know this with certainty, you know enough about your child to answer some basic questions that will give you some indication of the effect it will have. For example:
- Do they live within their means now or are they mired in credit card debt, with little or no savings?
- Do they appreciate the hard work that went into the life you were able to give them, or do they take it for granted and even feel entitled to everything they’ve received?
- Do they already have their own wealth, or will this inheritance be able to change their lifestyle considerably?
Consider your options beyond a direct inheritance
You have numerous options. You may choose to gift your child with some assets during your life and make sure they get professional financial guidance on how to handle them. You can also set up a trust so that their inheritance is disbursed over time, perhaps with some conditions. You may even decide that your child has benefitted enough from everything you’ve given them and decide to leave your money to worthy organizations instead.
With experienced legal guidance, you can determine what will be best for your child – and for the legacy you want to leave behind. Then, it’s crucial to give them some idea of what’s in your estate plan so that they’re prepared for the future.