Steps you can take now to help ensure that your child effectively manages their inheritance

On Behalf of | May 31, 2021 | Estate Planning |

Countless big-name companies operate out of San Jose. You might have amassed significant wealth if you work for one of them and want to leave it behind for your kids when you’re gone. You may worry about how well they’ll manage a sizable inheritance, though.

Many parents prefer to keep their child’s potential inheritances unknown to them until after their passing. You may be able to shape how your child spends their inheritance if you prepare them from what to expect, though. There are a few different ways that you can do that.

Educate them about making savvy financial choices early

Many young people struggle to understand the concept of budgeting. This often leads them to frivolously spend their inheritances. You may want to start providing your kids with a financial education early in their lives. There are many classes available online that educate teens about making wise money choices. There are also apps that allow young adults to keep track of where their money goes within a specified time period.

Prepare your child for the inheritance they will receive

You’ll want to let your son or daughter know how much of an inheritance they can expect to receive as they grow in financial maturity. You may want to let them know this information as you find yourself increasing your holdings or liquidating property to cover your expenses. You may also find it helpful to share some of your experience or reasoning behind your choices with them. Your children may be able to craft their own strategies and rationalize the options they’d make by having advance notice of what their inheritance may look like.

How funding a trust may aid you in controlling how your child spends their inheritance

Some parents of means end up funding trusts to pass on their wealth to their kids. This may be an effective option for you if your child doesn’t appear to be as financially mature as you’d like or if they have a history of addiction. There are both tax-savings benefits associated with funding a trust, and you also have an opportunity to draft the instructions for how your trustee makes distributions from it.

There are many factors to weigh when devising an estate strategy that is best for your unique situation. An attorney can help you hone in on the details most relevant to you so that you can make the most informed choices.