How to Pass on Your Money Without Spoiling Your Children
Written by Bradley R. Newman, CFP® at Fort Pitt Capital Group LLC.
If you have sufficient assets in your portfolio, you’re probably planning on leaving a portion of them to your children. While passing on your wealth gives your offspring a head start and safety net as they move forward in life, it’s crucial that they know the proper ways to handle their inheritance without spending irresponsibly or losing their sense of ambition. With the right guidance, stipulations, and assistance you can trust that your children will be ready to manage their newfound wealth and fulfill the legacy you intended.
Learn more about how to pass on your money without spoiling your kids by reviewing our inheritance tips.
Delay Wealth Transfer
A common worry parents have about passing on their wealth is that their children will spend all of it right away. Luckily, you can delay your wealth transfer by creating a trust that only gives your kids access to your assets after they reach adulthood. It can also be disbursed in phases, there are no requirements that it be distributed all at once.
One strategy is allowing your children to cash out their trust when they turn 50 years old. Though it may seem like a long wait, delaying the transfer to this age helps set your kids up for an easy and stress-free retirement.
Another effective way to prevent an inheritance from spoiling your kids is to establish specific conditions that will warrant or limit spending for your children. For example, they can only spend their wealth on emergency situations and serious investments, like buying a house, medical matters, or starting a business. Setting these conditions ensures that your offspring will use their money wisely rather than splurging on unnecessary purchases.
An additional boundary you can set for your kids is requiring them to use a wealth management company of your choosing when they receive their inheritance. When your children have a team of qualified financial planning and investment experts helping them manage their money, they’ll receive professional guidance when making spending decisions and ultimately preserve their inheritance.
Share Your Story
If you’re concerned about your children losing their sense of ambition when they inherit their wealth, consider sitting them down, and explaining how you got to where you are today. Talk about the sacrifices you made to secure a stable career and build your finances — and most importantly, talk about the sense of achievement you felt as a result of your hard work.
Explain how and why you made that sum of money and have a conversation about what you hope your children will do with it in the future. Specify what assets you’re leaving behind and who will inherit what while emphasizing the importance of ambition and hard work.
Teach Heirs Values
Before you make plans to pass on your wealth, it’s important to talk to your kids about how they manage their own money. Give them a solid financial foundation by teaching them how to budget and prioritize their expenses so they understand the true value of wealth — and what can happen if they don’t manage it well.
When your children understand the value of independently earning a living and making purchases with the money they’ve earned, they’ll be more likely to develop a serious work ethic in the future despite receiving an inheritance.
Manage Your Wealth at Fort Pitt Capital Group
You can prevent your inheritance from spoiling your kids by seeking wealth management services at Fort Pitt Capital Group. Our financial advisors have the knowledge and expertise to help you optimize your investments and create a personalized plan for the future. With transparent communication, exceptional client service, and proven investment strategies, we always do what we believe is best for you.
Contact us today to begin working toward your financial goals.