Tips for giving children a significant inheritance
It’s often stated that many children who get serious inheritance money–in the millions–end up wasting it, so vast fortunes often don’t get down to the third or fourth generation. If you’re worried about that happening to your money, there are a few tips that may help.
— Give out small amounts first. You may be planning on leaving your child $10 million, but you can give him or her $20,000 long before you pass away. Use this smaller amount as a test to see how it is spent, and it will tell you what the child will do with the $10 million.
— Use a trust that matches earnings. Some parents worry that children won’t have any incentive to work if they have free inheritance money coming in. One way to combat this is with a trust that just matches whatever the child makes in a year. If the child doesn’t work at all, he or she gets nothing. If the child works hard and makes $100,000 per year, that money is then doubled.
— Distribute money based on age. You might be worried that a young child–like an 18-year-old–won’t use money wisely, so you don’t want to give him or her the full amount immediately. You can set up a trust that pays out money at different ages. It could give out $1 million at 18, $2 million at 25 and the full $7 million remaining at 30, for example.
— Give things that aren’t cash. This way, money can’t be wasted–at least, not as easily. Use the money to buy a home for the child or to pay off student loans.
To do any of the above, make sure you know what legal steps to take in Florida.
Source: Forbes, “5 Tips Before You Leave Your Kids an Inheritance,” Robert Pagliarini, accessed Dec. 22, 2015