Every parent worries about how their children are going to turn out. Will they be a menace to society or will they make positive contributions in the lives of the people who live around them? Many times, out of love, parents will make very poor decisions when it comes to leaving an inheritance for their children. Often, parents will justify their poor decisions by thinking that all they are doing is giving to their children opportunities that they themselves did not have at the same age. Really, parents just want to make their children's lives easier than their lives were. What parents forget is that it was through the struggle of their own lives that they became strong and capable in the first place.
For over 70 years our Idaho Estate Planning team of attorneys has assisted clients in creating estate plans that provides specific benefits not only to the individual creating them but also to their children. Our Idaho estate planning team consists of partners Randy Budge and Lane Erickson and attorneys Nate Palmer and Dave Bagley each of whom have experience in helping clients create a plan that meets their specific needs including providing an inheritance to children.
Leaving an inheritance for your children through your Last Will and Testament or through a trust is a noble idea. Here are three specific tips that will help you as you consider leaving an inheritance for your children that will benefit them the most.
1. Make Distributions Based on Ages and EventsMany times children are under the age of 18 when their parents die. If this were to happen to you, you most likely wouldn't want to provide a substantial inheritance of money, property or other assets directly to your children while they're young.
In Idaho, a person is considered an adult when they turn 18. However, most people would agree that a person who is 18 years old is likely are not mature enough to handle a substantial inheritance even though the law may consider them to be an adult. In fact, most people who are 18 who receive a large amount of money would likely blow it all quickly through a lack of experience and/or maturity. For this reason, the first tip that we provide to our clients is that they should plan on making distributions to their children based on the specific ages of their children or on specific events that happen during their children's lifetime, or some combination of these two things.
When it comes to making distributions based on age, some clients choose to make a complete distribution to their children when they reach a specific age such as 25. Other clients stagger the distributions that are made. In other words, they would make a partial distribution when their child reaches the age of 25, and then 30, and then 35. In this way, these clients are providing distributions to their children over time when they are older and more mature and will likely be able to handle receiving these distributions.
Alternatively, other clients choose specific events as a basis for making inheritance distributions to their children. These events could include such things as going to college, starting a business, being married, or some other significant event that could occur during the lifetime of their child. These parents reason that when these specific events occurred their child could use a portion of their inheritance to help them with that event.
While there is really no specific set rules when it comes to creating a plan of distributing an inheritance to children, we do recommend that an outright distribution upon your death be avoided. Rather, some combination of making distributions at a specific age or as a result of a specific event are usually a far better plan a providing an inheritance to your children.
2. Use IncentivesA second tip that we often provide to parents as we discuss their providing an inheritance for their children is to use incentives as a basis for making distributions. Some examples will help build a straight what this means. Over the years, I have seen some clients who will create estate planning that makes a distribution to their children once a specific milestone is reached. In this instance, the client stated that a certain amount of distribution from his estate would be made to his child once they had finished their college education and earned a degree. A larger distribution could be made to that same child later in the event that child obtain a higher degree. And so forth.
Additionally, a client once declared specifically in his estate planning that he would make a distribution from his estate to his child at the age of 30 that would exactly match the amount of money that child had saved up to that point in his life. So if that child had saved $100,000 he would receive an additional $100,000 from his father's estate.
There really is no limit to the types of incentives that a parent can leave for a child in their estate planning. Each parent will have to consider the personality and nature of their children to determine whether creating an incentive plan as a basis for distributing an inheritance is the best way to provide for those children.
3. Give Without Giving CashThe final tip that we often give to parents when it comes to their making their estate plan of how to distribute an inheritance to their children is to give to them without giving cash. An example of this would be that the inheritance would be paid directly to a creditor for something important such as paying off a mortgage on a home, or eliminating or reducing student loans.
The real key to giving in this way though is to not let the children know that this is a part of the estate plan. Otherwise children may rack up a large amount of debt for a home that they really cannot afford with the anticipation of having their parents' inheritance pay off the mortgage. Remember, the goal here is to help your children financially, and not handicap them in any way.
Enlist an Idaho Estate Planning Attorney to Help YouOur team of Idaho lawyers can help you with any of your estate planning needs including creating a plan to provide an inheritance for your children. Whether you are seeking to create or review an estate plan for yourself or would like to help a loved one, we are available to discuss your options and answer your questions at an initial consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a consultation. You can also email us directly at racine@racinelaw.net. We will answer your questions and help you solve your Idaho Estate Planning problems.