It is a wonderful thing to be able to leave substantial resources for your children when you die, but an inheritance can certainly have a dark side to it.
An inheritance could help your family members start a business, be used to pay off your student loans or to put a down payment on a house or just cover their standard living expenses. An inheritance could also give way to tax obligations, spending sprees and bad financial decisions.
Whatever the age of your children, there are steps that you can take now to prepare them for a substantial inheritance.
Connect them with financial education resources
Not understanding how to budget could lead to someone frivolously spend a significant inheritance. Even teenagers can benefit from taking a course that teaches them how to manage their money. You might also encourage your adult children to attend seminars or short classes on money management.
Explain to them ahead of time what they will inherit
Whether you have needed to liquidate some property to cover your expenses or you have continued to increase your holdings over the years, you need to keep your children apprised of the overall value of your estate and what they can expect from it. The more transparent you are, the easier it is for your kids to plan ahead.
Consider setting your own rules if you worry about their management
If you know that your children have previously had issues with handling money or addiction, then you might want to consider adding a trust to your estate plan.
There are many ways for you to structure your estate plan to make an inheritance something positive instead of something potentially destructive.
