Will The Money You Leave Behind Ruin Your Children or Grandchildren?
It’s one of those fears many individuals (especially wealthy individuals) have, but rarely speak about. They aren’t worried about the “death tax” or other inheritance taxes. In fact, the concern isn’t heirs receiving too little money; it’s receiving too much.
The concern is that inherited wealth can have adverse effects on the people inheriting the money. The beneficiaries could treat it as though they won the lottery and splurge on reckless, irresponsible purchases. Imagine, the money you worked so hard to accumulate ends up being blown on a fleet of fancy cars or, even worse, a drug habit or multiple divorces.
People like Warren Buffett, Bill Gates, and T. Boone Pickens have gone on record stating that they do not plan to leave their vast fortunes exclusively to their children. In fact, Mr. Pickens has stated, “I’m not a big fan of inherited wealth. It generally does more harm than good,” according to a Forbes.com article discussing the fears associated with inherited wealth.
There are multiple ways to address this fear such as establishing a family foundation or a family bank (obviously, these options are generally utilized by extremely wealthy families and individuals). An option more readily accessible to most folks is establishing a trust that sets up protective lifetime trusts for your beneficiaries. This allows a trustee to manage assets either for or with the beneficiary. Having the right trustee in place will help guide your beneficiaries on their financial decisions, and can teach them about the benefits of leaving assets in a trust to provide a level of protection from creditors and predators.
In addition, it is important your beneficiaries receive training and education before inheriting the money. For example, at InSight Law, we hold training and education events throughout the year for our client’s families. This helps prepare the beneficiaries, the clients, and their advisors to plan for wealth reception before something happens.
If you have questions or concerns about how your loved ones will use the money you leave behind, take the time to sit down with an experienced estate planner. You should be discussing how your money can support your core beliefs, philosophy, and charitable intentions in addition to how your heirs will receive and sustain your wealth.