How To Prepare Your Children To Receive An Inheritance

How To Prepare Your Children To Receive An Inheritance

October 08, 2020

Do you want to leave a lasting legacy that blesses your family for generations? If you’re like most of our clients, the answer is a resounding yes! Building your wealth to protect your family today and for generations takes decades of hard work. But leaving a legacy goes beyond just leaving your money behind. 

We’ve all heard the cautionary tales of heirs who squandered the family fortune that represented a lifetime of work. That’s why, beyond just sacrificing and investing, you need to add something else to your checklist: preparing your children to receive an inheritance. No matter how much you plan to give them, you want your children and the following generations to make the most of what you pass down. Let’s look at some ways you can do that so your children are prepared for the wonderful gift and responsibility of your generosity. 

Don’t Be Shy About Your Values

A critical part of preparing your children to receive an inheritance starts when they’re young. Throughout their childhood and young adult years, you should be sharing financial life lessons and values. For example, if you choose to drive an older car so you can put money away for a rainy day, or a longer-term goal such as their college education, explain why you do that in a way your children will understand. If you share your money or time with charitable organizations, let your children know your thinking behind that and why you give to the organizations you do.

When your children get their own money, either through a gift, inheritance, or part-time job, prompt them to consider saving and gifting some of the money, so they come to see their money as holding value beyond a means to buy things. If you have adult children, tell stories and share about the struggles previous generations went through to create wealth to instill a strong sense of appreciation and work ethic in the younger generation. What you want your children to understand is that wealth is not created overnight and that if you are lucky enough to have more than you need, you ought to carefully preserve it. 

Communicate Your Estate Plan Details

Many families draw up a will and other estate planning documents and then leave them in a drawer, leaving the details to be discovered by family members after they have passed away. That can lead to unhappy surprises, or worse, it may lead to squabbling among family members. That’s why it’s important to let your adult children in on the details of your estate plan while you’re still able to discuss your wishes and adjust as needed. If one of your children is much more financially secure than the other and your giving reflects that, it’s better to explain your reasoning behind that while you still can. Similarly, if you’re leaving substantial money to a cause, or a loved one outside the family, let your family know now.

If your estate includes substantial hard assets (such as jewelry, art, or real estate) that are hard to divide evenly and may hold sentimental value, talk with your children about who may want the items or if it makes sense to simply liquidate them. These discussions can help limit disputes after you pass away and maintain the family harmony. 

Consider A Trust

If you’re still concerned about how your children will use an inheritance, or if you’re also leaving money to younger family members such as grandchildren, consider setting up a trust. A trust can be a wise option to pass money down, even if you’re not wealthy. Trusts can give you the power to pay out an inheritance over time instead of all at once, while a trusted third party oversees the remaining assets. There are a variety of trusts designed to help you pass money to a charity, to your spouse, or your grandchildren with protections built in to reflect your wishes. An experienced lawyer can explain all your options and help you with the details. 

Develop An Outside Support System

If you’ve spent decades building your wealth, you deserve to have a trusted team in place to protect it long after you’re gone. A financial professional can help bridge the gap between facilitating conversations with loved ones and putting together a strong financial strategy for sustaining wealth. 

At Fiduciary Wealth Management, we’re here to help you in as many ways as possible, from laying out your legacy goals to creating a holistic strategy to creating a financial plan across multiple generations. To find out more, schedule a phone call now!

About Rocklin Senavinin, CFP®

With over 20 years of experience in the financial planning industry, Roc has dedicated his career to helping individuals live comfortably in retirement and enjoy the assets they have spent their career building. He is co-founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the holistic process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long term. To learn more, connect with Roc on LinkedIn or visit www.fidwm.com. If you have questions, feel free to schedule a phone call using this link.

DISCLOSURES 

The views expressed represent the opinions of Fiduciary Wealth Management, LLC and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person.

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