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Thursday, April 15, 2021

What Type Of Inheritance Are You Giving To Your Children?

By Darrell Bryant

By Darrell Bryant

As you approach retirement, you may be thinking about how you’re going to leave an inheritance for your children. Depending on your resources and how many children you have, you likely have a lot to consider. You might also have mixed feelings about what inheritance means within the context of your family dynamics. 

Does giving your children an inheritance feel like a symbol of your lifelong care for them? Or does it feel like an obligation you’re reluctant to grant because it means a more frugal lifestyle in your remaining years? Or perhaps you worry that your children—knowing an inheritance is coming—will be less responsible in building security for themselves than they otherwise would be.

The answers to these questions should determine the plans you make to distribute your wealth after you’re gone. If you do decide to gift your children an inheritance, there is still much to consider and plan for so the inheritance is protected, accessible, and used responsibly.

Gift The Money Now Or Later?

If you know you want to provide your children with an inheritance, you may be wondering if it would be better to gift them the money now or wait until you pass away. 

Many parents are attracted to the idea of gifting the money while they’re still alive because they’ll get to enjoy watching their children make good use of the money, perhaps to purchase a first home or start a business. Additionally, gifting assets that fall under the annual exclusion from gift tax can be a great way to pass money to your children tax-free.

On the other hand, gifting money too soon could put your own security at risk. You can never be sure exactly how long you’ll live, and the money you’ve saved for your retirement should be prioritized for your retirement. If there’s any question about your own security, it’s usually better to wait and only leave an inheritance from what remains in your estate.

Should You Place Restrictions On The Inheritance?

Another point to consider is how you’ll give your children access to the inheritance. If you’re worried your child will be likely to quickly spend a large amount of money in a short period of time, you may want to consider placing restrictions on the inheritance money through a trust. A trust designed in this way will only allow certain amounts to be withdrawn from the inheritance so that it’s not all spent at once.

Of course, this may not be necessary for children who are responsible money managers. This decision can be more difficult if you have one child who is responsible and another who is not. Nevertheless, you should consider designing a trust for each that will work in the best interests of each child. 

What Does Fairness Mean In Your Family?

Speaking of children and their differences, many parents grapple with the concept of “fairness” when it comes to inheritance. Some parents believe their children should receive the same amount of money regardless of their life circumstances. Other parents are inclined to leave a larger amount to a child who may be struggling financially and a smaller amount to a more successful sibling.

There is no right or wrong answer to this question. Our recommendation is to have open, honest conversations as a family so your children don’t experience any unpleasant surprises when they receive their inheritance—especially as they will likely be grieving the loss of their parents. If open, honest conversations are not possible for your family, we encourage you to remember that, as the builder of wealth, the choices are ultimately up to you.

We Can Help You Make A Plan

You have a lot to consider, so we don’t blame you if you’re not sure where to start. If you haven’t reviewed your estate plan—or haven’t yet created one—the time to do so is now. If you wait until it’s too late, you won’t be in control of who gets your remaining wealth.

To prevent this from happening, and to partner with an advisor who can help you make the decisions that work for your family, call us at (402) 932-2141 or email contact@dbretirement.com to schedule a complimentary consultation.

About Darrell

Darrell Bryant, CFS®, CAS® is Omaha’s Retirement Strategist. As the founder of D. Bryant Retirement Strategies, he focuses on helping individuals and couples nearing retirement do so successfully. Along with more than 30 years of experience, he received the Certified Fund Specialist (CFS®) designation and a Certified Annuity Specialist (CAS®) designation from the Institute of Business & Finance. Passionate about helping as many people as possible in his community, he hosts Retirement Strategies Radio, heard Saturday mornings at 7:00 a.m. on 1110 KFAB. He has also written articles on financial planning that have been featured on Fortune.com, FoxBusiness.com, Money.com, and in the Midland Business Journal. To learn more, visit his blog, his website, or connect with him on LinkedIn.