Parents often worry about their inheritance. Most of the time, they’re concerned about the amount of tax that they’re going to have to pay. But they’re often frequently worried about how their children will manage their money once they’re gone. After all, they’ve spent their whole lives building wealth – it would be a shame for it to all disappear overnight thanks to financial mismanagement.
Other parents are worried that gifting a lump sum to their kids will rob their children of ambition. What’s the point of working hard and trying to find fulfilment if you’ve already won the lottery? As a result, more and more parents are looking for ways to prepare their children for suddenly coming into contact with wealth.
One example of parents trying to avoid issues around inheritance can be found in the example of CNN anchor, Anderson Cooper. Cooper is the son of successful fashion designer, Gloria Vanderbilt, who is believed to be worth more than £150 million, according to Forbes. Anderson went on the Howard Stern show in the US and told the radio host what he thought about inheritance. He said that he didn’t believe in inheritance and called it a curse, saying it was an “initiative sucker.”
So what should parents do if they’re concerned with leaving their children an inheritance?
Give Your Children A Financial Test
Parents can gift up to £3,000 a year, tax-free, to their children. Here’s an idea: use these smaller gifts to see how your kids react to receiving a large chunk of money. Do they wisely squirrel it away or invest it? Or do they blow it all in Vegas? It’s a good idea to see exactly how your kids react to having a relatively small amount of money before they inherit the entire $10 million estate.
Get Kids Involved In Your Personal Foundation
A private foundation can be a great opportunity to build wealth and teach kids about money. There are stories all over the internet of parents selling their businesses for a fortune and then using personal foundations to disburse that money over time. In one example, a man sold his business overnight for $25 million. He then created a personal foundation disbursing 5 percent of its balance each year to his children. Each child, however, had to donate 1 percent to their own cause, which the man hoped would increase their work ethic.
This is a good idea for your kids too. When they approach probate purchasers in the future, they’re more likely to put their money into a personal foundation, if they see themselves as stewards of the family estate.
Give Without Giving Cash
There’s an alternative to giving money directly, of course. An estate planning attorney, Jeff Lewis, says that some of his clients have used their money to pay down the mortgages of their children, rather than giving them money directly to do what they want with. Parents can use their annual gift allowance to do things in their children’s lives that will help them to be more financially free and reduce some of the annoying financial responsibilities that come with living independently.
The school day is relatively short, so it’s natural that some subjects will get less coverage than others. But the financial education of children has often been sorely lacking, with teachers leaving it up to parents to teach the fundamentals of how to save and spend safely. With the rocky economy we now find ourselves in, it is more important than ever that kids are taught how to be financially self-sufficient. Here are the three things we think they should be teaching about money in schools, and how you can help your kids in the meantime.
