There is an old Chinese proverb that states, “Wealth does not pass three generations.” This proverb shows that the first generation works hard to create a fortune; the second generation lives high, and the third generation squanders what is left. We all know of situations where the grandparents left large estates that were completely wasted by their children and grandchildren. How do you keep your children and grandchildren from squandering the wealth that you worked hard to accumulate?
One good solution is to educate your children and grandchildren about how they preserve their inheritance. This includes teaching your children about investments, learning about family values, and how to live off the income of the inheritance, without spending down the principal. One easy way to educate your children and grandchildren about investments as they get older is to open them an investment account as a birthday gift or a Christmas present. This will allow them to make investment decisions, with your advice and counsel.
Another good solution to protect your estate from being squandered is the use of a continuing trust or lifetime trust share. This type of trust minimizes the ability of the adult child or grandchild to get their hands on the big money and spend it all. Instead, the child or grandchild is given an allowance, but the principal is professionally managed. The trustee of this trust share would have the discretion in how much the beneficiary needs for their health, education, maintenance, and support.
In summary, it is tragic to see a financially successful family lose all their investments, within just a few decades after the passing of the grandparents. There are steps you can take to minimize these risks.
Tiffany Tucker is an associate attorney at Farrar & Williams, PLLC and can be contacted at 501-525-4401 or by email at firstname.lastname@example.org. She can answer any questions you have about this subject.
By: Tiffany Tucker