The decision of how to leave your property to your adult children is an important one. Ultimately, the foundation for that decision is based on the trust that you have in your children. Will they use their inheritance from you in the way that you would like? How much do you trust them to make good financial decisions? How you answer these questions will inform how much and when you want to give them their inheritance. Each of your children is different, and so you should select an estate plan that allows you to create personalized inheritances for each of your individual children.
All parents are unique and have different parenting styles. You may have different goals with your estate plan than your neighbor. Someone may be more willing to give large sums all at once, while others would be concerned with what effect that may have on their children. All of these factors go into deciding how you want to pass on your assets to your adult children. One benefit of having adult children is that you probably already have an idea of their character and what their future may be like. Following are some estate planning options for giving an inheritance to your adult children.
Options of Giving to Adult Children
Option 1: Give Some Now
If you feel confident that you have enough funds for retirement, you can give some inheritance early. That way, you can enjoy seeing the benefits that your gifts have on your children. It can also give you additional insight into how your children will handle a larger inheritance.
Option 2: Lump Sum
Giving the inheritance in a lump sum is a good option in situations where you have complete confidence in your children. If they are responsible, and are in a positive and productive life situation, a lump sum may be a good option. However, a gift given cannot be ungiven. You do need to understand that once your adult child receives the lump sum, they can easily lose it in the event of bankruptcy, divorce, or a lawsuit. A lump sum gives 100% control, but also it gives 0% protection.
Option 3: Installments
Another option is to give adult children access to a certain percentage at certain ages or intervals. For example, you may give access to 25% of funds at age 25, 30, 35, and 40. This can give your children multiple bites at the apple and help them make better decisions as time goes on. If you live a long time, it may cause some of these distributions to be lumped together, depending on how you have designed your estate plan.
Option 4: Keep Assets in a Trust
The last option is to keep the assets in the trust. Trusts are incredibly flexible, and you can use them to provide for your descendants without giving them control over those assets. That lack of control actually protects the trust property from creditors, lawsuits, divorce, and bad spending decisions. If you have a disabled child, a trust can offer additional benefits. A trust most accurately continues your parenting style, and you can use it to incentivize good conduct or career ambition. A trust can also help there to be property passed on to your grandchildren as well, if desired.
Estate planning has many different options, and does require a clear vision and strategy from the beginning. Contact The Rains Law Firm or schedule a meeting to discuss your options.