Baton Rouge trust lawyers at Legacy Estate & Elder Law discuss effective ways to leave an inheritance to your children to ensure it’s used as you intend.
Self-made billionaire Warren Buffet once famously said, “Leave your children enough money so they can do anything, but not enough that they don’t have to do anything.”
Commodore Vanderbilt’s grandson, an heir to some $60 million in 1885, also once declared that “inherited wealth is as certain death to ambition as cocaine is to morality.”
It’s no secret that the expectation of a substantial inheritance may dilute a child’s motivation to pursue professional goals.
Of course, you may not be as wealthy as Warren Buffet or Commodore Vanderbilt, but the issue of leaving an inheritance to your kids may still be causing problems… especially if you’ve observed that your child is eagerly counting on inheriting money rather than making plans to attend school or forge their own path in the future.
You may ask, is disinheritance the answer? Will even threatening to disinherit motivate a child to shape up?
Well, perhaps. But that would only be the case if your child gets a real sense that you are not fooling around. However, you can still use your child’s inheritance expectations in a more positive way to attain the same goal.
Many parents are now turning to “Incentive Trusts” as a way to encourage positive behavior and use the family’s wealth to keep the child motivated long after mom and dad are gone.
Here’s an illustration of how such a trust may work:
Upon death, a parent can choose to leave a child enough to cover his basic necessities outright. The rest of the child’s inheritance will be placed in trust where a trustee will make all decisions about how the funds are used according to mom or dad’s instructions. Perhaps one of those instructions is for the trustee to pay the child from the trust one dollar (or how much you want) for every dollar he earns himself. Furthermore, the parent may instruct the trustee to pay this child substantial portions from the trust if certain goals are attained, like a college degree, passing licensure examinations, abstinence from substance abuse, providing well for his or her own family, or any other goal you deem worthwhile.
However, perhaps the greatest disadvantage of incentive trusts is inflexibility. If you created the trust, it may seem justifiable for you to make the receipt of an inheritance conditional. However, you also have to take into consideration situations like when the beneficiary suffers a catastrophic injury that prevents him or her from attaining the goal of completing a college degree or when the beneficiary is torn between completing a university degree and going for their dream job, or when staying married means living a miserable life with an abusive spouse.
In theory, incentive trusts can help save your children from the negative consequences of entitlement. But, in practice, it is still the relationship we foster with our children that could have the most powerful impact on their behaviors. As billionaire Warren Buffett says, “Love is the greatest advantage a parent can give.”
If you are interested in learning more about how you can leave an inheritance to your children in the best way possible, our experienced Baton Rouge trust lawyers can help you. Contact (225) 744-0027 to schedule a consultation today.