Financially Speaking

Over the next several decades, it’s estimated that Baby Boomers will pass down $30 trillion in assets to future generations. If you shudder to think what your beloved kids may do with the money you worked so hard to build, you’re not alone.

Research shows that inheritances dwindle significantly in the first few years of someone receiving one, with one study finding that one in three Americans who receive an inheritance have negative savings within two years of the event.

Fortunately, there are ways to protect your life savings from being squandered.

Put your wishes in a will Create a clearly defined will, listing who gets what assets, if a trust should be set up to help administer those assets, and who the trustee should be.

Trust the testamentary trust

The best way to maintain control over your assets in death is to specify in your will that you want a discretionary testamentary trust created. The trustee, appointed in your will – typically a responsible family member – would then decide when the beneficiary should receive assets from the trust.

Explore an annuity

If there’s no obvious trustee to oversee a testamentary trust, then you can instruct the executor of your estate to purchase an annuity for beneficiaries. The executor would take a lump sum of money from the estate and purchase that investment. The annuity’s payments would then go to the child. This option isn’t as flexible as a trust and shouldn’t be your first choice, but it can come in handy if you can’t choose a trustee or if you think the trustee won’t commit to overseeing a trust for an extended period of time.

Give gifts while you’re still alive

Another way to maintain control is to parcel out money while you’re still alive. Not only can it be rewarding to see your children enjoy their inheritance, but you can control who gets what when. There are risks to this approach including giving out too much money and then not being able to cover your own living expenses.

Teach your children about money

The best line of defence might have nothing to do with wills or trusts at all – if you teach your kids from an early age how to be responsible with money, they’ll be less likely to blow their inheritance.

Be sure to talk to your kids about your will, your estate plan and bring them into the conversation with your professional advisor.