Most people who have wills set them up so that their surviving spouse inherits. If their spouse is no longer alive, then their children inherit equal shares. If this is how you are set up, what do you want to happen for your children? Do you have any strong feelings about how long you want the money to last?
When asked this question, most people answer that they want their children to be happy or successful or able to take care of themselves. They frequently do not want their money to be spent immediately, especially if there is a lot of money and it took them a lifetime to accumulate it. If those are your objectives, make sure to take into account the following:
• Will children inheriting a large lump sum of money work as you intended?
• Will your children have the time, interest or skills to manage a large sum of money themselves? If not, do they know how and why to get professional help?
• Will they be able to withstand the requests for money by friends, neighbors and relatives?
• Will they be happier and more successful with the money?
The outcome of an inheritance depends largely on your children's relationship with money. Is money for them to be stewarded or spent or invested or given away to friends and relatives?
I ask these pointed questions because I have seen poorly prepared children and even adults get into trouble when they have suddenly acquired an amount larger than they are used to. Their troubles have included drugs, wine, women and song. Even the best prepared children can run into problems preserving the money if they have creditors, people suing them, or divorcing spouses.
Have you given this area enough thought? What can you do?
The most common approach to dealing with these issues is to use trusts of different types to protect both the money and your children. The trust document is a set of written legal instructions for how the trustee must control the disbursement of income and principal from the investments in it to the beneficiaries of the trust. The trustee can be a family member, friend, professional, institution or some combination of them.
You can set up a trust while you are alive or have one created upon your death (this is called a testamentary trust). Having a trust gives you a say about how your money is to be used when you are no longer here.
Money clearly does not by itself create happiness, but it can make many aspects of daily living much easier. In the right circumstances it can create opportunities and more freedom. Ideally, it will help to create the kind of world you want for your children.