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Have you ever
wondered?
“How will your
children spend their inheritance?”
The
thought has had to cross your mind before today.
In a
minute or so we will get to the startling truth about what people do with their
inheritance.
If you
think hard, you really do have a good idea what your children would do, don't
you?
After
all, by watching your kids or your grand kids, you probably have a pretty good
idea how they value money.
Are they
like you, a frugal saver?
Or are
they like your siblings, big spenders even when they don't have it?
If you
are like me, you probably want your money to make their life easier in
retirement. Especially since they most likely will NOT have a great retirement
plan like you did.
I
started this report after several conversations with friends of mine, all
financial professionals. I asked them outright what they had planned and why?
I
actually was not surprised at their candor with me. People like to talk about
this subject, although usually with a negative overtone.
I was
shocked however at how many of them took the simple shot gun approach to
planning. In other words they just planned on leaving the money to their
children and even though they know the money would not be spent wisely and they
are making no other plans. When asked why, most replied it was too much
trouble. This from financial professionals.
Those of
them who had a plan, truly thought it out. In addition to planning in detail
how and when the children would get the money, this group set up expensive
trusts to make sure their wishes would be complied with. Why? Because, like
the group that did nothing, this group also thought that their children would
mismanage the money. In effect, waste their parent’s hard earned money. To
this group, this was not acceptable.
That
simple fact is that parents, for the most part, feel that their children will
not handle their inheritance well. The real difference between families is
whether the parent cared or not.
Next
there was that small group who had no children. They were as conflicted as the
rest. If they left it to siblings or nieces and nephews, they for the most part
felt it would not be spent wisely too. The other dilemma for them was what
would happen if they left it to a charity. Would the money be used wisely? Or is
the fact that charities administrators change regularly mean that their lump sum
donations value to the charity would depend on who was there to administer it
that particular day!
Not a
comforting thought. Another non-comforting thought about charities is that for
a single day only, you’re a hero, after that you’re very forgettable. Is this
how you see yourself being remembered?
Recently a friend of mine told me how his father-in-law would pull out a video
tape of the ceremony for his million dollar gift to a college and make his
children watch this tape every Thanksgiving. It seems that that is the only way
he could get anyone to care or even remember about his gift. Of course, his
children didn’t care for the yearly movie or the gift!
Back to
children and siblings: If there one thing that you can depend on, it’s that
each child of yours is as different as night and day.
It seems
that in most families there is the golden child, who can do no wrong, and then
there are the “other” children. The ones who, well let's just say, are wild
cards.
With the
golden child you could probably give them a million dollars and they would
invest most of it for the future. With the “not so golden children” it’s:
"let's party".
So what
do you do? You could just hand it out and how it gets spent, “Oh Well”! You
could go the route of expensive trusts and try to manage it from the grave. Or
you could do half and half, a lump sum for the golden boy and simple trust for
the not so golden boy. Of course that reminds me of the Tommy and Dickey
Smothers bit where Tommy say’s "Mom always like you best!".
Let’s
take a look at the top ways inheritances are spent. But first the startling
truth: Although it’s hard to determine this exactly but more than 85% of
those who inherit any money have nothing left within 5 years.
Here are
some of the top ways they spend it:
1.
Purchase a car. Since most inheritances are not "fortunes" it's easy to
justify taking what mom and dad left and spending on that dream car. Perhaps
it's that 1969 Corvette that your 42 year old child still covets from their
youth. You know the one that they'll buy that needs a little work to make it
nice again and of course it never will get that extra work. Or how about your 18
year old grandchild that wants that nifty little two seater that just happens to
cost $45,000 and would look terrific on campus in front of the dorm, if they can
still afford to go to college. Since most inheritances are between $10,000 and
$50,000, cars are the number one way to spend that free money you left.
2.
Vacations. Same as cars, a good trip to the Islands is a great way to toast
the parents!
3.
Bigger homes. For the bigger inheritance, got to have a bigger home. After
all the 1800 square feet that Mom and Dad raised the family in isn't good enough
for Sally and Johnny. Got to keep up with the Joneses. Just visit any high-end
development in America today. You'll see a new swing set in back yards of those
5000 square foot homes occupied by 30 something’s with their 2 brand new SUV's
in the driveway next to the baby carriages! Ever wonder how someone so young
can live so well?
4.
College educations. Finally, some common sense. With college costs as high
as they are, some smart parents will be putting Mom and Dads money to good use.
(could this be the golden child?).
5.
Start a business: Sounds like a good idea until you see how many businesses
fail. Of course, if it's that lazy son-in-law who has not been too good at
supporting your daughter, he may well talk your daughter into starting a
business for him because the manager at the Ford plant just does not understand
him.
So here
we are back at the beginning again. How do you think your children will spend
your money?
Can you
say "they'll do just fine" or "they'll just throw it away". Do you care?
Do you
need to make new plans for your money? Do you have any ideas what to do? Do
you know the alternatives?
Should
you sit down and sort through your personal situation with someone who can guide
you through the alternatives?
Is this
type of planning just too complicated and costly?
There
are alternatives that don't cost you anything to set up and while you are alive
you still have control of your money. In fact I know two ways you can set up an
account that will pay their inheritance out over a 10 year or longer period and
you don’t need a fancy expensive lawyer to set it up or to administer it.
If you
feel that you need some help, then call your financial advisor.
Don't
have a financial advisor or you would like to get a new one, then go to
SeniorsONLYFinancialAdvisor.com and find a financial advisor in your area.
Good
Luck,
InvestU.com
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Information, charts or examples contained in this report is
for illustration and educational purposes only. It should
not be considered as advice or an endorsement to purchase or
sell any security or financial instrument. We do not and
cannot give investment advice.
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