Many parents have a second home, a significant portfolio or collectibles that they’d ideally like to pass on to their kids once they pass away. They may be uncomfortable with the thought of doing so because they worry that their kids may squander such a lump sum settlement unwisely.
There are steps that you can take now, while they’re still impressionable, to help prepare your child to inherit a sizable inheritance.
Providing them with a solid financial education
You have an important role in shaping your child’s understanding of money matters. While the whole “lead by example” approach is a good one, we can all stand to learn new tricks from others along the way.
Many banks and wealth management companies offer extensive educational material on their websites about financial matters. Some apps have emerged in recent years that allow consumers to track their spending and create savings goals. You may want to encourage your child to tap into some of these resources.
Preparing your child for what you plan to leave them
While some parents tend not to discuss money matters with their kids, it is important that they do so. This includes forewarning them about the assets that you plan to have them inherit.
Your children may be under the false impression that you have more assets than you actually do. They may not attempt to reach their full potential because they may assume that they’ll be able to live large on the inheritance they receive from you.
Another benefit to preparing your child for what they’re going to receive is that it allows you and others to provide them with more specialized insight into how to preserve an asset’s value. They might have to undergo a stiff (and potentially costly) learning curve if you don’t adequately prepare them to receive it.
How a trust might give you the control you want
Many parents worry about their kids feeling a sense of entitlement and how it may impact their ability to make anything of themselves. Others have seen where their children haven’t valued the money they have come into and don’t want the same to happen to their kids.
An attorney can advise you of the many different trusts that exist and how you can decide the conditions under which your child receives distributions.