Most people assume that children with wealthy parents will receive large inheritances. However, as discussed in Forbes, Warren Buffet, with a net worth of over $70 billion, plans to leave his children: “enough money so they would feel they can do anything, but not so much that they could do nothing.” While Buffet’s children will still receive more than most, he brings up an important point – what you leave your children can impact how they live their lives.
There is nothing necessarily wrong with simply leaving children a large lump sum. For responsible adult children, it is likely that they will use their inheritance wisely. However, if your children or grandchildren are younger or not very responsible with their finances, a large inheritance may do more harm than good.
One estate planning solution is to create an Incentive Trust. This involves providing stipulations in the trust that encourage productive behavior. For example, an Incentive Trust may match a child’s earned income or subsidize a child’s income from working at a charity. Another option is a trust which can provide protection in a divorce or lawsuit. Under certain conditions, funds can be accessed. This may be a good option for children who are more likely to be involved in a lawsuit, such as a doctor. Finally, you may consider a Charitable Trust. This leaves a portion of your assets to a charity. A Charitable Trust can also allow children some control over how the funds are distributed to charitable causes.
The best way to distribute an inheritance depends on each situation. The first step is meeting with a qualified elder law attorney to discuss your concerns and estate planning goals.