Problems That May Come With Giving Your Kids an Early Inheritance
By: Barry E. Haimo, Esq.
July 29, 2021
You’ve worked hard in your life to accumulate wealth, and you have everything set up just as you want in the event of your death. Now, you’re thinking about giving your children their inheritance early so you can see them enjoy it while you’re still alive.
That thought is not an uncommon one. After all, wanting to be able to actually see the benefits that your inheritance brings to your kids is a strong impulse. Why shouldn’t you get that enjoyment?
Still, there are things you should consider carefully before making this choice. Dispersing inheritance early to your family can result in all sorts of problems. Here are just a few of them.
Your Life May Exceed Your Own Expectations
You may think that giving your assets away now instead of when you pass away is a good idea, but it’s important to keep in mind that you may live longer than you expect.
Today, people are living longer than ever. Because of that, at some point you may need to tap into your assets in order to care for yourself. You don’t want to outlive the money you’ve set aside for yourself and then have to depend on your children to care for you.
Think carefully about how much money you must keep for yourself if you intend to distribute your assets before your death. Be generous with yourself before you gift early inheritances to anyone.
You Might Be Creating Drama
If you want to gift an inheritance to one child but not another, you must consider if it will create bad feelings or family drama. Some children may be in more need of assistance than others, spurring feelings of resentment.
Conflict can even come from giving away equal amounts of money to everyone! You know your family best, so really put some thought into the dynamics at play if you decide to give your kids an early inheritance.
You’ll Be Around to Watch Them Squander It
If your children don’t end up using their inheritance in the way you might have hoped, it can create feelings of animosity between you and them.
It may even make you feel depressed and frustrated about your own life and choices as you wonder “what it was all for” and have to live with the knowledge that all of your hard earned money is being squandered.
Good Things Can Come From Giving an Inheritance Early, Too
It’s not only negative things you must consider when thinking of giving an inheritance early, of course. There are definitely advantages to you in this situation, including:
- Watching your children use the money well. Adult children with young families of their own could likely really benefit from an early inheritance. It can make a difference in their lives in a variety of ways. And remember, you can also control how the money is disbursed to them through something like a trust fund if you’re worried they won’t spend it wisely.
- Avoiding court. One major benefit of an early inheritance is helping your loved ones avoid a lengthy process after you pass away called probate. By giving away money early, you may be reducing your estate which may result in the avoidance of proceedings related to probate after you die.
- Reducing estate taxes. When you give away money early, you reduce the size of your estate. This can help save money that would otherwise be lost to estate taxes.
Ultimately, it’s your prerogative. As you can see, there’s a lot to consider when deciding on an early inheritance. You may feel apprehensive about planning, but it doesn’t have to be this way. We’ll help you achieve your goals and ensure you get the full picture of what an early inheritance can and can’t do for your estate.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
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