How do you prepare your heirs to inherit generational wealth?

Question

Here's the question, and it's really a 2-part question. I would very much appreciate opinions/advice from others who have put thought into these things and maybe even implemented some of the plan.

1) What financial help, if any, do I provide to my children as they become adults and throughout their adult life? I struggle with this one. I have spent literal decades working jobs that I often hated because they paid well in order to provide a nice life for my family. I don't want my kids to have to do the same, but I also want them to be self-sufficient and accountable. I have seen first-hand in the form of an unexpected inheritance how a windfall at a young age can lead to long-term negative consequences. It seems like a fine line.

2) The long-term goal, among other things, is to create generational wealth. That means the next generation is going to inherit it and hopefully many more after that... that seems silly to say because of course it's true but it's largely an abstract concept until you actually put a plan in place. How do you prepare them to receive and manage that wealth so that they don't squander it and/or have it cause more harm than good?

Miranda Bilodeau · Answer

If you want to prepare your kids for the future and provide some financial assistance, you can create a revocable living trust with incentive provisions for your beneficiaries. This can limit the amount beneficiaries receive from the trust as well as requiring certain behaviors or actions from the beneficiaries in order for them to collect funds from the trust. This can allow the trust to survive several generations as well as encourage positive financial habits for your descendants.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication

Greg Scott · Answer

My 2 cents.

Kids need to be taught how to manage money and wealth. Sometimes that involves letting them make mistakes, allowing them to be uncomfortable, and deal with the consequences of their own actions. If they haven't learned the skills by the time they are 18, they probably won't.

Here is a story about one of my children. Our family went to a restaurant that had a "claw machine" with colorful prices. My 7-year old was fascinated by it and wanted to play. I explained that it was a scam. He informed me that he KNEW he could win a prize and asked me for money. I said I would not give him my money, but he could use his own if he wanted. (At the time he got $1 per week for doing some chores.) I agreed to give him his allowance a couple days early.

Then I upped the ante. I told him I would give him $2 if he didn't play the game, and if he wanted to play the game, he got just the normal $1. He chose to play the game. He put in his $1 and in about 10 seconds learned he was not going to get a prize. He was shocked it was over and when it was clear I was not going to give him more money and he lost his allowance, he burst into tears. He cried and cried. While we were empathetic, we let him feel the sting of his decision. Of course, the crying stopped when our food came, but I don't think he ever forgot that lesson. At 28, he is very good at managing his money.

How do you prepare your heirs to inherit generational wealth?

2 Replies