Oftentimes, the clients with whom we work with here at the Lang Law Office have concerns about how their beneficiaries, specifically their children, will handle an inheritance. If you share these same concerns, there are steps that you can take to help manage your children’s inherited assets. The Bureau of Labor Statistics reports that as recently as 2007, more than 21 percent of American households reported receiving some form of general wealth transfer. Thus, this issue of properly handling an inheritance is one that faces more than just your children.
Setting up a revocable living trust gives you significant power over how and when you’re children will receive the assets tied to your estate. In order to help ensure that they use those assets wisely, it’s recommended that you include certain provisions in your trust outlining how it is to be disbursed. These include:
- Arrange disbursements to coincide with life events: Consider having disbursements sent out when a child goes goes to college, or when another gets married. This gives them every incentive to use the assets wisely.
- Test their money management skills: Set up disbursements in small initial increments to see how your children will handle a sudden financial windfall. Through this, you can protect some of their inheritance should they misuse their initial gifts.
- Tie trusts disbursements to incentives: Arrange it so that per year, the amounts that your children receive are only equal to their own achievements for the year, such as their annual salary. You can also tie a disbursement to a decision to become involved in charity work, or to return to school to pursue an advanced degree.
You can find more information on trust administration by browsing through our site.