If you plan to leave your children an inheritance, there are many issues you need to think about before putting it down in writing. Every person is different, including your children, so you must know how to approach the situation strategically. Here are a few estate planning tips for leaving your kids an inheritance in Texas.
See how they are with money first
Before you make any decisions regarding an inheritance during the estate planning process, you should observe your kids to see how they are with money. Some people get their hands on some money and immediately start spending it on things that they don’t need. Other people come into money and start saving and investing it.
Gifting your child some small amounts of money and watching what they do with it is an effective way to gauge whether they will be able to handle a large inheritance responsibly. If you believe that your children will not be able to handle a gigantic sum of money without them spending it irresponsibly, there are some other ways you can leave your kids an inheritance without giving them a one-time huge sum of money.
Incentive trusts are useful
Instead of having your children receive a large amount of money at once, you can set up an incentive trust for them that will ensure that your kids don’t become lazy and just live off the money that you’ve given them. An incentive known as an investment banker clause will pay your kids yearly depending on how much money they make in their careers. This means that if your child has a job that pays him or her $50,000 a year, the incentive trust will also pay him or her $50,000 per year.
Leaving an inheritance is a great way to guarantee that your children will be financially set throughout their lives. However, a huge inheritance can sometimes cause your children to become lazy and complacent, so you shouldn’t shy away from exploring different, more effective ways to distribute the inheritance to them.