Studies show that the largest contributing factors to generational loss of wealth stem from lack of communication among family members and the failure to prepare heirs. Often, money fears underly the lack of communication and trust. This inevitably leads to unprepared heirs. The following blog discusses the fears that prevent people from communicating with their loved ones about their wealth.
Common Money Fears
Fear of Creating an Entitlement Mentality in Heirs
Hollywood loves to portray horror stories about trust-fund kids who relax and enjoy life instead of working because they would inherit a large inheritance. Knowing that a large inheritance beckons, they did the bare minimum to ensure they would receive the funds. However, in the process, they simultaneously ignored opportunities to get the most out of their education. Or, they simply refused to learn new skills. In the heir’s minds, their future was secure.
Thankfully, you and an experienced estate planning attorney can craft an estate plan which prevents this outcome. For instance, your estate plan could include incentives for your beneficiary:
- Qualify them to receive money from the trust only after they graduate from an accredited college or university with a certain minimum GPA.
- Include restrictions about how they can use the money. f
- Or, you could leave the decision of how much money the estate pays and when they pay it to the discretion of a trustee.
Fear That Heirs Will Squander Their Inheritance
You worked hard to create and maintain your wealth. To do so, you have spent when needed and saved in other areas. Thus, it is reasonable to fear that when you pass along your wealth, your level of frugality may not continue. To combat this fear, include provisions in your estate plan that list exactly how the money you are leaving to loved one can be used. Thus, if you intend to provide your loved one with an education and seed money for their first business, you can restrict the use of the money to those purposes. On the other hand, you can select successor trustees to make trust distributions in accordance with your long-term objectives. This means that if your heirs want a wild weekend in Vegas, they will have to find the money to fund it elsewhere.
Fear That Outside Influences Will Overtake Heirs
Unfortunately, the world is filled with unsavory types. They enter your life and the lives of your loved ones when money is at stake. While your loved one may be incredibly level-headed and frugal, they may find it difficult to refuse a partner who wants to go on expensive trips or buy nice clothes. In addition, with about half of all marriages ending in divorce, potential gold diggers might find your loved more attractive if a large divorce settlement could set them up for life. However, through proper drafting, an experienced estate planning attorney can restrict how loved one accesses the money you leave them. What’s more, they can also protect it from creditors and predators.
Fear of Treating Heirs Unequally and Fostering Sibling Rivalry
Depending on your parenting philosophy, decide you you want to treat your children or grandchildren. Treating loved ones equally means that they all receive the same amount. Treating them fairly means that your loved ones receive money and property according to their individual needs and situations. The answer to the “equally or fairly” question depends on your unique circumstances and intentions. Thus, it may involve some soul-searching.
Fear That Disclosure Now Might Limit Choices and Changes in the Future
Whom you tell about your plan does not impact your ability to change your mind; however, the type of plan you create may limit your ability to make future changes. A revocable living trust or a last will and testament can be changed at any time up until you are incapacitated (unable to make decisions for yourself) or you die. On the other hand, there are irrevocable trusts that, while offering increased asset protection and potential tax benefits, may be more complicated or problematic to alter if you change your mind in the future.
Fear about Running Out of Money
For many people, earning or acquiring money offers security. Without money, they feel vulnerable. Also, unless you plan to work until the day you die, you may experience money fears. For example, you may fear the wealth you have acquired during your lifetime will run out before your death. This could leave you to rely on government assistance or family members. While this scenario is a possibility, working with an experienced financial advisor can help position you get ahead of this fear. Your wealth advisor will take a look at your current income, savings, and expenses to create a budget. Then, they will develop an investment strategy that matches your future needs and wants.
Overcoming Your Money Fears
Creating a comprehensive financial and estate plan while remaining honest and open with your loved ones will help overcome money fears. To help you prepare to create your plan and discuss it with your family, consider how you would answer the following questions.
- What does money mean to me?
- Am I comfortable telling my family about my plans for my wealth?
- What do I want to teach future generations about money?
- How can I help future generations develop financial competency?
- Am I concerned that I am going to run out of money?
- Do I worry about creating an entitlement mentality among my children, grandchildren, etc.?
- If I leave a large sum of money, do I think future generations will squander it?
- Do I think outside influences will take advantage of my children and grandchildren if I leave them a large sum of money?
- Do I want to treat my children and grandchildren equally or fairly?
By answering these questions, you will express your fears, attitudes, and goals about wealth. What’s more, it will show you how you want to ultimately pass assets to your children, grandchildren, and beyond. Also, discussing your philosophy about money with your loved ones educates them. Thus, they will know what to expect after you are gone. Call us to schedule an appointment so we can discuss your options for protecting your wealth for future generations, sans the money fears.
About Skvarna Law in Glendora & Upland, California
Skvarna Law Firm operates offices in Glendora and Upland, California. Also, we provide legal services. We cover San Bernardino, Los Angeles, Orange, and Riverside Counties. This includes several cities. Upland, Ontario, Rancho Cucamonga, Fontana, Colton, Rialto, Chino, Chino Hills, Glendora, Claremont, Pomona, La Verne, Montclair, San Dimas, Azusa, Covina, West Covina, Diamond Bar, Walnut, La Puente, Corona, Norco & Mira Loma.
