Founding Attorney
Q: Are your children ready to inherit your wealth?
New York and New Jersey estate planning attorneys assist clients with comprehensive estate plans designed to distribute the wealth they’ve accrued during their lifetimes to the people and/or charities that matter most to them. Generally, the beneficiaries include their children, whether minors or adults. But what happens if the children are not prepared to effectively manage and grow that inheritance?
Most people with minor children have a will that not only names the people they want to be the children’s legal guardians if they should die before the kids become adults, but also provides that the inheritances of minor children will be held in trust until they reach adulthood. Depending on the parent’s designation, the child may get their entire bequest upon attaining a particular age, say 18 or 21, or may get percentages of their inheritance at different ages, like 21, 25, and 30.
Parents can do something similar with adult children through spendthrift trusts if they feel they are not financially mature or responsible and would squander their inheritance quickly if given unrestricted access or to protect the money from the child’s creditors.
Statistics indicate that wealth retention among generations is a problem. In fact, “70% of family fortunes run out in just the second generation” and 90% run out by the third generation. Some may be surprised to learn that the majority of the world’s richest people did not merely inherit their wealth and that “68% of the world’s richest people are self-made”. So how do parents combat the problem of poor wealth retention?
Steps to prepare children to manage their inheritance:
- educate your children about finances early on– giving them money to use, lose, save, donate, invest and/or learn important financial lessons;
- discuss net worth and finances openly and honestly in an age-appropriate way and involve children in minor family wealth management decisions such as researching and picking a charity to receive a donation;
- teach and encourage children to build their own wealth so they have experience handling finances before inheriting a large sum;
- create a comprehensive estate plan that is appropriate for your particular situation and modify it over the years, as necessary, when your financial or familial circumstances change.
If you need assistance with an initial estate plan or would like to modify an existing one, the estate planning experts at Merlino & Gonzalez can help you. Contact us today to schedule a consultation.
From our offices in Staten Island, New York and East Brunswick, New Jersey, we represent clients in both states in all aspects of estate planning and estate administration.