Several strategies exists when it comes to providing inheritances to children.
People loving giving advice.
It seems everyone has an opinion about something.
People especially love giving advice about parenting.
According to a recent The Wall Street Journal article titled “When to Give Inheritance Money to Your Kids,” you may get conflicting messages about when your children should inherit.
Some suggest money be gifted to support children while the parents are alive.
Others recommend simply leaving a sum when the parents die.
There are reasons for choosing one or the other.
If you have excess funds beyond what you need, lifetime giving (also known as giving with “warm hands”) may be helpful to your children and grandchildren right now and allow you to witness the impact of your support.
The money received under this approach is not tied to the loss of a loved one.
For those who recommend leaving money solely when you die, the reasons can be varied.
For some families, the only option is simply to leave whatever remains.
Under this option parents need to ensure that they have enough funds to uphold their standard of living in retirement.
To leave a postmortem inheritance, these parents must take into consideration taxes for their children and themselves as well as the cost of covering short-term and long-term care associated with aging.
Some parents may prioritize improving their standard of living in retirement and enjoying the fruits of their labor.
Some parents balance their own needs (and wants) and the transfer of their wealth to the next generation.
Either way, it is important to meet with your experienced estate planning attorney and your financial advisor to create a plan to meet your current and future goals for yourself and your children.
If you wonder about how your children will handle an inheritance, you could give them money for specific purposes while you are alive.
Should they prove to be financially irresponsible with such a lifetime gift, then you could create a spendthrift trust to provide guidelines and incentives for the prudent use of the inheritance when you die.
Discussing finances with your children and grandchildren while you are alive provides an opportunity to pass on wisdom and possibly meet immediate (and legitimate) monetary needs.
For example, you may choose to provide assistance on student loans, health insurance, or bills while someone is temporarily unemployed.
When doing so, you should be clear on the purpose and expectations associated with the gift.
Whether you choose to give to your children while you are alive or when you are dead, a trust can provide tax advantages and structure for meeting these goals.
Reference: The Wall Street Journal (April 30, 2021) “When to Give Inheritance Money to Your Kids”