Parents want to raise their children to be independent and successful and to use whatever resources they have to give their offspring a leg up in life.But it’s sometimes difficult for parents to find the right balance between making financial and professional resources available and encouraging their children to grow into independent adults. A whole industry now exists around “next generation” advice and about how to “launch” children into adulthood.
And let’s be honest: If affluent parents were not
anxious that their children could end up as alcoholics, say, or plagued by bad decision-making, this industry would not exist.
But what the industry doesn’t play up is what happens when the best efforts fail and the children end up troubled. At some point, those parents will have to decide what to do about leaving money to their problem children.
And if they do not come up with a plan first, that money could make a bad situation worse.
“Everyone today is worried about their children even though their children are wonderful right now,” said Jerry Hersch, of counsel at the law firm Carlton
Fields and an adjunct professor at the University of Miami School of Law.
“They worry, `My child is going to marry someone who is going to take him for a loop. Or what happens if my child is in an auto accident and someone sues him?' “ So what should parents do? Advisers say this is among the toughest conversations to have.
“For some couples, it comes out pretty quickly, but for most people, it's not a conversation they're willing to have,“ said Jean A Dorrell, president of Senior Financial Security in Summerfield, Florida, a town next to The Villages, a large retirement commu nity. If ever there was a Pandora’s box for parents, this is it. Do parents leave more money to the good children and less to the bad ones, or vice versa, since the bad ones will presumably need more help? Is there a way to use an inheritance, regardless of the size, to give incentives for better behaviour? What do you do if a child has turned out fine but has married someone you think will take your money and run? There are many options to protect your children from themselves but the options are the epitome of tough love. Still, they could help your child in the end.
Money does not cause
problems, but it can sure accelerate them. The simplest strategy is to choke off that fuel.
Trusts are a popular way, but they can seem complicated and expensive to set up. Dorrell said she often recommended simple annuities for clients who had life savings in the hundreds of thousands, not millions, to restrict how the money was passed on to heirs.
By titling assets precisely through a beneficiary designation form, the money can be distributed as the parent wants. If the problem child dies before the term of the annuity, whatever is left can stay in the family line
Source: International Herald Tribune
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