The holiday season is often an opportunity for families to spend time together and be thankful for all that they have. With all this in mind, it may be a good chance for parents to make sure that they have an effective estate plan in place that addresses what they are leaving to their children. Many parents decide to leave an inheritance to children in a will in the hopes that the financial gift will be used well and responsibly. However, hoping that this will happen is very different than helping to make this happen.
In order to avoid the mismanagement of an inheritance, parents in Los Angeles may want to think about taking a few simple steps to help protect an heir from blowing the money received in an inheritance. And chances are, beneficiaries will be thankful that there are measures in place to protect them from overspending.
Communicate: Talk about the details of an inheritance with children after they have reached an appropriate age. This can give kids an opportunity to ask questions and address their financial future.
Set limits: By including certain restrictions and guidelines for an inheritance, parents can make sure their children receive money on their terms and as they see fit.
But avoid overly strict terms: The money in gifted in an inheritance should not be seen as a burden or threat to heirs.
Appoint a trustee: A third party can help manage the money if it is placed into a trust. A trustee can make sure the money is distributed properly and in accordance with a decedent’s wishes.
These steps are just a few ways that parents can protect the money they are leaving in an inheritance. It can be very reassuring to know that a financial gift will not be spent irresponsibly. And in the long run, a child will likely be grateful that the money has made a positive and long-lasting impact on their lives.
Source: CNN Money, “Keep your kids from blowing their inheritance,” Kerri Anne Renzulli, Nov. 21, 2013