Ask anyone, and they would tell you they would rather have their parent than any inheritance. After all, no money in the world can replace the parent-child bond.
Still, even though most children understand that they will receive some legacy from their parents, few are truly prepared to handle a life-changing amount of money.
Learning how to manage an inheritance
Creating an estate plan is about more than the handling of your assets if you become incapacitated or die. It’s also about educating your children about fiscal responsibility, instilling your values and preparing them for the responsibility of money management. A comprehensive estate plan is crucial for establishing generational wealth, and by involving your children in the process, you are providing a safe learning space.
With an unexpected, life-changing windfall, your children may become fearful of spending and losing money, so they leave it untouched and never enjoy any of the experiences that wealth can provide. Or, they may squander it, leaving nothing for a rainy day.
With estate planning, you can discuss the value of money, investments and the importance of having a readily available emergency fund. Help them to understand the responsibilities that come with having wealth and encourage them to ask questions. Allowing them to express their thoughts can help them feel more informed and prepared for future roles.
A good rule of thumb is for them to spend a small percentage on a luxury item that they really want or something that reminds them of you. It’s also important to use some for charitable giving. The rest should be set aside while considering how they want their financial future picture to look.
If you’re unsure how to start the estate planning process or discuss it with your family, you may want to speak with someone who can guide you along and help make informed decisions to protect your family’s financial future and legacy.