If you have considerable assets, you likely plan to leave at least some of them to your child. If the thought of doing so gives you some anxiety because you worry they might squander the money, then you’ll be happy to know that you have options.
In a post earlier this year, we highlighted the prospect of funding a trust and being clear in your directions for it to ensure that your child doesn’t receive too much too fast. While funding a trust is ideal, equipping your child with a financial education is as well.
Why you need to provide your heirs with money smarts early
One thing that young people often struggle with is budgeting. This can cause heirs to haphazardly spend their inheritance. One of the best things you can do now to prepare your child for when they receive an inheritance is to teach them how to make wise money decisions. One good starting point is to have your child track their spending through an app.
Let your child know what you plan to leave them
Many parents shy away from letting them know how much wealth they plan to leave them. However, if you give them some idea, it will allow them to begin formulating ideas about financially savvy moves they may want to make to preserve its value. You two may even be able to discuss hypothetical choices as you educate your child about handling money.
Why an incentive trust can be a good choice
There are many different trusts to choose from. You may opt to fund out that incentivizes your kids for making certain choices, whether it’s graduating from college or landing a job. You may elect to de-incentivize them for irresponsible actions. A trust carries with it many tax savings benefits that can benefit you as well.
Devising an estate strategy that teaches your child to become financially mature isn’t likely to be easy, but it’s worth it. You may want to review the many different options discussed on our website before sitting down to engage in estate planning yourself.
