The thought of your heirs carelessly spending their inheritance is a concern many share. As you look ahead, you have the power to influence the management of your wealth once it passes on to your loved ones. Deseret News reported that nearly 70% of people who receive inheritances waste it.
If your heirs have yet to prove their financial wisdom, you can take deliberate steps with your estate plan to guide the use of their inheritance. This way, you can provide not just wealth, but a structure that encourages its responsible use over time.
Create a trust
Establishing a trust is one of the most effective ways to control the distribution of your estate. You can dictate when your heirs receive their inheritance and under what conditions, such as reaching certain milestones in life like graduation or marriage.
Incentivize good behavior
Incorporate incentives into the trust to promote positive actions. You can offer additional benefits to those who sustain employment or contribute to charitable causes. These incentives can motivate your heirs to make decisions that will benefit them beyond just the financial gain.
Arrange for gradual distribution
Set up the inheritance to distribute in stages rather than a single payout. This approach protects beneficiaries from potential inexperience and prevents rash spending, allowing them time to develop financial acumen.
Educate your heirs
Take an active role in teaching your heirs about financial stewardship. Share your values with them and express what you hope they achieve with their inheritance. Whether through casual conversations or formal meetings with financial advisors, this education can be invaluable.
Implement a spendthrift clause
If you have concerns about your heirs’ potential debts, include a spendthrift clause in your trust. This provision ensures that creditors cannot claim the trust’s assets to pay off the beneficiaries’ debts before they receive their distributions.
There are many proactive measures you can take to ensure that your heirs do not waste their inheritance. These steps can provide a framework that secures your legacy and offers your heirs a lasting advantage.