lang: en_US

Unconditional Love Doesn’t Have to Mean Unconditional Inheritance

Ali Katz


Most parents love their children unconditionally and want to do whatever they can to smooth life’s rough road for them.  But that unconditional love doesn’t necessarily mean that unconditional trust exists when it comes to leaving children with a hefty inheritance.

A recent Forbes article looked at smart ways that parents can pass the love along while still protecting the wealth they have spent their lifetimes working hard to accumulate:

Annual exclusion gift test.  A parent can gift up to $14,000 every year to each child without incurring gift taxes; both parents together can give a total of $28,000 to each child.  You can use this annual exclusion gift to test the waters on how your children will handle a financial windfall.  Do they pay off debt, save it or place it on the ponies?  Their actions can give you insight into how they might handle their inheritance.

Incentive trust.  Parents that have worked hard to accumulate their wealth often worry that a large inheritance may harm a child’s ambition to succeed on their own.  If that is a worry for you, an incentive trust allows you to set goals or milestones for your children to achieve before distributions are made.

Staged distributions.  Parents can create a trust with the distributions tied to different age stages or events (graduating college, starting a business) so the inheritance is doled out over time.

Leave a legacy.  Creating a personal foundation to support the causes you believe in, and involving your children early on in that foundation, will help them learn about the responsibilities that come with wealth and create empathy for a world outside their own.

Hold the cash.  Instead of giving cash directly to your children, consider alternative giving strategies, like paying down their college or home loan mortgage debt.  This will make a big difference to their financial future without tempting them with large amounts of cash.

Wealth creation trust.  As mentioned in a previous post, one of the best ways your unconditional love can be expressed to a child or grandchild is through the establishment of a wealth creation trust to commemorate a birth or a milestone birthday or event, and then directing monetary gifts to the trust over time.

When your child gets to be an age specified in the Trust, he or she can step into the role of Co-Trustee of the Trust, learning how to operate the trust and best utilize the funds in the Trust.  He or she will be trained on the best types of investment for the Trust, learn the purpose of the Trust (to encourage the creation of wealth from one generation to the next, rather than the squandering or wasting of assets); how to protect it (keep the investments in the name of the Trust, regardless of how funds are used, so always title investments properly and sign on behalf of the Trust); and how to create more wealth in the future using the Trust assets.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation.  Contact a Personal Family Lawyer® today to schedule a time for us to sit down and talk about a Family Wealth Planning Session, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security.