Is it important to leave money behind to your kids or is it more important to teach your kids to take care of themselves?
Many high net worth Americans are leaving less inheritance to their kids, according to a report on CNN Money.
Thirty-two percent of high net worth Americans are minimizing their children's inheritance. And when we move to the baby boomers, that number goes up to forty-five percent.
What are they doing with that money?
As it turns out, many of these high net worth individuals are following the example of Warren Buffet and Bill Gates, leaving the money to charitable causes.
Of course, there are still those who feel that it’s important to leave the family money to their children, citing the need to preserve the family’s wealth. But what’s even more interesting is that many wealthy parents haven’t necessarily told their children that they are rich, fearing that it might impact their children’s work ethic, writes CNN.
This article raises one very important estate planning question: How can you leave money behind for your children without negatively affecting their work ethic?
The answer to this comes from sophisticated estate planning. Irrevocable (and revocable) trusts can be drafted to provide funds for the children during their lifetime for the bare necessities, while giving the remainder to charity upon your death. The bare necessities tend to include health, maintenance and education.
Some trusts even include language allowing distribution of principal to the children for the pursuit of a profession or start of a new business.
Of course, for the high net worth individuals, there is a lot more at stake than providing for progeny. A properly designed estate plan can help provide for future generations and at the same time, help save on estate taxes.
But if the CNN report is any indication, many of these individuals won’t be planning as extensively to preserve the wealth for their children.