Many parents believe that it’s an act of love or generosity to leave their children an inheritance. Some also think that the more money they leave, the better.
Forbes’ recent article, “Why Not To Leave Too Much To Your Grown Kids,” reminds us that for everything you give your child, you take something away.
Parents often modify their retirement budgets to leave something to their children. And some who survive on Social Security may feel guilty, if they die and burden their children with funeral and burial expenses.
If you think your kids will be appreciative of the money you leave, some say it takes about three days of grieving for your children to consider your inheritance all theirs. But financial icons Bill and Melinda Gates and Warren Buffett plan to leave relatively small portions of their huge estates to their children. They hope that this will promote their kids’ long-term emotional well-being, rather than feeding their materialistic needs.
You may need to change the question from “How much is too much?” to “How little is too little?”
Do your kids expect you to hand over a fortune? If so, have a family meeting and say that you’ve decided to leave all of the money, except the personal belongings, to charity. You could also leave all your money to a family foundation where the kids are the directors who’d assign the money only to charities. Would they think that’s great? If so, you have probably raised kids who can control the cash. But if after the meeting, they start to secretly discuss ways to ship you off to a dementia care unit, you may want to rethink your estate planning.
There are two parts to consider: disbursing an inheritance and the amount you give.
Think about separating your kids from being involved with your estate when you die. Have an independent party liquidate everything except the personal property, then divide the proceeds equally among your kids. That may be the best option to keep them together.
Second, it’s hard to decide how much to give your adult children. How dependent are your kids on your financial support? It’s ironic that it’s the ones who don’t need your money, who’ll be fine. Those who need the support, will most likely be negatively affected.
One suggestion is to leave half of your estate to your children and half to charities, and let your kids select which charities they would like to support. This leaves a valuable life lesson to your kids that will be remembered.
It’s not uncommon for even modest amounts of money carelessly given to children to bring about unexpected and corrupting results. Give your children enough to do something, but not so much that they do nothing.
Reference: Forbes (June 7, 2017) “Why Not To Leave Too Much To Your Grown Kids”