Experts tell us that we are on the verge of the greatest transfer of wealth the United States has ever seen. If you are on the gifting end of those transfers you need to consider the question “Will your beneficiaries blow their inheritance?” Unfortunately, experts also estimate that at least one-third of the recipients of the coming wealth transfer will indeed do just that – blow their inheritance. What can you do to protect the inheritance you leave behind? The single most important step you can take to prevent your hard earned assets from being squandered or lost is to create a comprehensive estate plan.
Right now, the “Baby Boomer” generation is heading into, or already in, their retirement years. The sheer numbers of people who make up the Baby Boomers will result in a wealth transfer estimated to be in the trillions as they die and leave behind estates. Several studies tell us that the recipients who are likely to receive an inheritance from these estates are ill equipped to handle an inheritance, meaning they are at risk of losing it within a short period of time after receiving it. In fact, one recent study showed that one in three beneficiaries of an inheritance were in a negative savings situation within two years of receiving their inheritance. Experts speculate that much of the problem is that beneficiaries fail to use the inheritance to save for their own retirement, instead seeing the gift as a way to purchase “extras” such as vacations or “toys.”
While there is plenty of advice out there for beneficiaries, what can you do to help ensure that the estate you leave behind doesn’t disappear in a short period of time? A few suggestions include:
·Talk to your beneficiaries about their coming inheritance. Don’t assume they know how to handle their money much less save for the future.
·Use your estate plan wisely. Don’t hand a large sum of money to someone who isn’t ready to handle it.
·Create a trust agreement for beneficiaries. Use the trust to doll out assets slowly to allow beneficiaries to adjust to the idea of having money.
·Consider keeping important assets, such as real estate, in a trust and only allowing beneficiaries the use of the asset instead of gifting it outright.
Careful estate planning can go a long way toward protecting the assets you leave behind from being lost or squandered by beneficiaries who are simply not prepared to handle them wisely.
If you have additional questions or concerns about how best to transfer your wealth when you die, contact our office to schedule an appointment.