As a parent, you want to give your children the best that this world has to offer. You have probably made countless sacrifices over the years so that your children would have more opportunities.
Your decades of hard work will now mean that you get to leave behind a significant legacy for your loved ones after you die. They stand to inherit tens of thousands of dollars in investment funds, real estate and other assets that you accrued throughout your life.
While you may feel quite excited about the positive impact that this inheritance will have on your loved ones, it could actually cause real harm to your children. How does the legacy you leave behind create risk for your children?
Disputes could damage their sibling relationships
You have likely been clear with your children about your estate planning wishes. Whether you want them to share ownership of the lake house or sell off most of your property and split the proceeds, you believe they know what to expect.
However, siblings often find reasons to fight with one another during estate administration. Large inheritances have damaged and destroyed countless sibling relationships throughout human history. If you don’t plan carefully to prevent disputes and clarify your intentions to your children, what they receive from your estate could damage their relationships with each other.
An inheritance can lead to bad behavior
When people receive a significant windfall, they often make bad choices with those resources. Consider how many people who win the lottery eventually go bankrupt later. An inheritance can be similar in that it gives someone a large amount of money at once with almost no oversight regarding how they use it.
You can prevent your children from using their inheritance wastefully or for dangerous habits, like excessive drinking, by creating a trust. Trusts allow you to limit how people use inherited resources or how much they can access at once. As an added bonus, trusts are generally harder to challenge in probate court and have the oversight of a trustee that could help smooth disputes among beneficiaries.
Looking at the likely impacts an inheritance will have on your family can help you make better estate planning choices.