You likely expect that your children and grandchildren will value the inheritance that you leave them. You might imagine the musing what you leave behind when you died to cover their college tuition or help them make a down payment on their first home. Unfortunately, the average person is less respectful with inherited property than you might assume.
Financial experts estimate that roughly 70% of property doesn’t pass from one generation to the next, and 90% of property will not make it to the third generation. Even if your family members have always been respectful toward you and responsible about money, they might waste what they inherit after you die.
A trust helps prevent the misuse of inherited assets
When you leave specific property to certain family members in a will, they can do whatever they want with that property after it officially transfers to them. They could demolish the home that you bequeath to them or liquidate an investment account and spend every penny they inherit on a vacation.
The only way to prevent misconduct and wastefulness with inherited property and to preserve it for the next generation is to use a trust. A trust allows you to limit what people use their inheritance for and even how much they can spend at one time. You can use a trust to set aside property for grandchildren so that your children won’t have control over that property.
You can even place certain criteria on the right to access trust assets. Requiring proof of sobriety or having the trustee validate the expenses someone wants to pay with trust resources are ways to ensure that family members don’t misuse the inheritance that you leave behind.
Is your estate plan on doing everything that you need it to?
You can never know for sure what people will do with a significant amount of wealth, even if you feel like you know them well. Families that have withstood numerous challenges may crumble in the face of contested estate administration and someone’s sense of entitlement regarding their inheritance.
Planning to protect the assets you leave behind from misuse by your loved ones can have a secondary impact by limiting the possibility of estate issues damaging family relationships. Adding the right documents to your estate plan will help you protect your legacy and ensure its impact on the people you love will be positive.