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Most of us like to be in control. I certainly do. But what about controlling how our heirs use the money we bequeath?
That’s a question I’ve had to face. I’m hoping both of my 30-something children will use my bequest to bolster their long-term financial future, adding the money to their portfolio and perhaps using a portion to buy new homes.
Both have good financial habits, and the money they’ll receive could—if used sensibly—mean they’ll be far wealthier in their 60s than I am. But, of course, there are no guarantees. Perhaps their spouses will argue for using the money in other ways. Perhaps they’ll commit some major financial blunder. Perhaps the money will make them the target of some scam.
Meanwhile, because I’m remarried, I could have used a trust arrangement to leave money to my wife Elaine, and then have what remains pass to my two children upon her death. But I didn’t go that route. Instead, I’ve asked Elaine to leave at least part of what I give her to the kids. She’s promised she will, and I totally trust that she’ll do so. But I can also imagine scenarios where it won’t happen. What if she gets hit with, say, huge long-term-care expenses?
As the joke goes, it’s tough to make predictions, especially about the future. But that’s also why I’m not inclined to bequeath the money with any strings attached. Besides the cost of complicated trust arrangements, what if Elaine or my two kids get hit with a large and urgent financial need? I’d rather not tie their hands.
I’ve told Elaine and the kids what they can expect from my estate. I’ve made it clear I don’t want any quibbling over my will, my beneficiary designations, the division of my possessions and my funeral arrangements. As detailed in the recent posts from Dana Ferris and Marjorie Kondrack, as well as the comments those posts triggered, such fights can cause hefty emotional damage, and I’d be appalled if anything like that happened after my death. But I also believe the best course of action is to clearly express my wishes, and then trust that they’ll be respected.
This and the thread about family estrangement are dancing around the same truth, which is that we have no control. Not over other people, even our beloved kids and relatives; and not over the unfolding of life. Good estate planning (for estates) and good communication (for family matters) can influence the direction things will go, but are far from guarantees. With apologies for ratcheting up the altltude of discourse, one could argue that learning this truth is the the task of life.
This reality fuels my gratitude for the many wonderful – and often evanescent – people and moments in my life.
I have two children. Both are fine individuals, and they get along well with one another. One is married with three children. One is single. That doesn’t matter. I have had “adult” relationships with them for years – we have conversations as equals, and I’ve tried to treat them as equals since they could walk. All I care about is that they know I love them. It is up to them what they feel they should do with what I leave them. I won’t be around.
Someone once said passing on things of value with a warm hand is better than a cold one… I’ve been guided by that now over the years and more so now that I’ve been diagnosed with stage 4 prostate cancer. I feel good that my daughters who are now both professionals, will make good decisions, and frankly any financial wisdom I have was earned the hard way, by making bone headed mistakes, which I’m sure they will too. Cheers.
Jonathan,
Of course there’s no way I can be certain, but I believe Elaine and your kids will handle the money according to your wishes. All of the steps you have taken since the diagnosis will help immensely.
You’re in our thoughts as if you are family.
Dan and Chrissy
The first time we prepared estate planning documents, our four children were about 5 to 15 years old. The lawyer gave the standard advice that if one of us were to die, that person’s half of our estate go into an irrevocable trust to ultimately be split among our children. That way the surviving spouse could not leave everything to a new spouse.
We wanted everything left to the surviving spouse with no strings apptached. I explained to the lawyer that we trusted each other more than we trusted our children. If a child had significant problems (eg., in trouble with the law) we probably did not want that child to receive a significant inheritance.
If my wife survived, I had to trust her to take appropriate actions so the new spouse would not inherit all of our money. Similarly, she had to trust me.
The lawyer was so uncomfortable with our position that he had us sign a release saying what we were doing was against his advice. I guess he did not want one of our kids to sue him some day.
As it has worked out, all of our kids are productive members of society and we are now comfortable with each of them receiving their inheritance. But I still believe we made the right decision at the time.
There are always stories of family squabbles over inherited money, which is why experts say to put it all in writing. Leave nothing to chance. You never know what will happen, especially if someone remarries. We created 2 revocable trusts, one for me and one for my wife, mainly for tax reduction purposes when we pass. Our 4 kids will get equal shares of the assets, and the only requirement is that they either sell our house or one of them buy it within a certain time frame (which will not happen because it would take a big chunk of their inheritance to buy it). There are no stipulations as to how they spend it. They and their spouses work and are responsible, so they can use this money however they please. We gift money to them now, when their need is greater than when their kids are grown and out of the house. Home prices and children daycare costs are very expensive, and they need the money more now than when their kids are grown and out of the house.
Boomerst3, would you expand on your thinking behind the 2 irrevocable trusts? You mention they are for tax reduction purposes. But with the new One Big Beautiful Bill’s estate tax exemption amount of $15 million per person, indexed to inflation, it takes a considerable $30 million + estate to be taxed now.
We are considering a revocable trust in which, by agreement, the surviving spouse’s share in the trust becomes an irrevocable trust at that time. The intent is to avoid the step-parent/disinheritence issues if the surviving spouse remarries, as well as requests from “outside” family members (siblings, nieces, and nephews of the surviving spouse, most of whom are not good savers) who may make a pitch for money in our older years — when it is harder to say no, plus cognitive decline considerations.
Thank you for any insights you can share.
When drafting our wills, our solicitor said “You can’t manage from the grave”. As you said Jonathan, direct how the money shall be allocated to all the important people in your life, then you just have to trust them with it.
Another great article, thank you.
Obviously the only perfect solution is a trust, but financial institutions have minimums over $1M, and of course there is a fee that will cut into the net heirs receive. You might consider setting up some joint accounts with only your kids as beneficiaries. She could of course change that after you die, but the intent would be clear and perhaps honored. I do not have a stepmother issue, but am concerned about a child squandering the inheritance rather than saving it for retirement. My solution on a wing and a prayer is providing some of the inheritance at death, but another chunk that they have agreed in writing to save until age 61 then take out the balance on a 20 yr schedule. Maybe they will and maybe they won’t, but hopefully they will think twice before violating our agreement. At least there is a specific framework.
I don’t agree a trust is a “perfect solution”. I’ve seen 2 lawyer prepared trusts fail to do substantial aspects of what the owner intended. One went to court and the judge basically said (literally 5 times in 10 minutes) to go to mediation. So the trust ended up paying all the costs of both sides (about $100K) and the parties with standing and the plaintiff were basically free to do whatever they agreed to in mediation. The judge couldn’t care less what the wishes of the deceased were, but simply wanted a quick agreement and the case settled. So much for the wishes of the deceased.
Your point is invalid. The problem in your examples was not in doing trusts, it was in how they were written. It’s like saying it wasn’t a good idea, but the problem is they weren’t signed or witnessed. The devil is in the details, Maybe you would feel better if I change it to the BEST solution.
Actually. I didn’t say how they failed so I’m curious how you determined “… it was how they were written”. In fact, one failed due to nothing having to do with the language in the trust, although that was a factor (but not the only factor) in the other case. In the right circumstances I think a trust can work well. In other circumstances, not so much. Not my definition of “Perfect”, or even “the BEST”. I’d suggest a trust “may be a solution” depending on the circumstances.
Hope springs eternal. The only good thing about your plan is that you will never know the final chapter. I believe one of the authors you cited is the one from earlier this week who was disinherited by her stepmother. We can’t predict the future including how people will act. A simple plan buster is if you die, your wife gives PoA to a child when she should or shouldn’t, then the kid takes your stash. A child could also influence their parent to change the will because they need it more than your child does.
Actually, your last sentence is pretty much exactly what happened to someone I know. When it comes to money it’s amazing what some people can rationalize/justify.
Hi Jonathan, you are always thoughtful. Thanks for sharing this.
Hello John,
In my estate docs, among many things, I have your story about your several times great grandfather and the end result. This is to remind my sons of what can happen with an inheritance and to be careful. I commented in another post here at HD, about supporting grown children about what I feel is a good direction to take with raising them.
There can be no certain assurance of how things will go once I’m gone, and I am OK with doing what I can to give them a nice boost in their lives.
First: the fact that you have discussed your estate plan with your children already places you in a minority. In my experience in the wealth management biz, I met far more clients who did not want to discuss their estate plans with their children for reasons that included: fear, being pestered for money or it was none of their business.
Beyond that, the decision of whether or not to have a trust depends on a number of factors: the ages of your children, their ability to handle money, addictions, disabilities, and/or protecting a child from a spendthrift spouse. For most of us, the age at which they might inherit is the most common reason for a trust. In my own case, our son is now 40 and financially responsible, so whatever share he gets will be outright or via an inherited IRA. However, if he were not to survive us, our trust contains alternate distribution provisions.
I think your thought process is admirable, and I hope, as you do, that there will be “peace in the valley” after you are gone.
In my instance, I had to use a trust. One of my children, now aged 41, is simply not financially responsible. While I will treat both of my children equally, I will not give him access to his inheritance in a lump sum. (His older sister will get her inheritance as a lump sum because she is responsible.). Were he to receive a substantial sum in the near term, he would likely use it to sit on his as_ at home, playing video games, vs. working.
I have his inheritance established to give him 10% per year for 10 years, or until he reaches age 55, whichever is sooner. I figure if he hasn’t managed to get his head out of his as_ by 55, there’s not much hope for him anyway.
It’s important to at least ponder the family dynamics of treating one child differently than another. Will disproportionate treatment result in resentment between children?
I was the executor for my mother’s estate (she had been the executor for Dad). She had a simple will and passed away in Texas, where she was living with my sister. I hired a Texas attorney. I never met her but felt comfortable from what I could garner online. My sister represented the family for the one brief in-person court proceeding. At the appropriate time I distributed all the money from the estate to my three sisters and myself. All told, the legal fees cost the estate about 2K as I recall. It was not particularly hard work for me. There was zero drama and no adverse impact on any relationships. I hope and expect that your family will have a similarly smooth experience, Jonathan.
Jonathan, You are so wise to think of situations that might affect Elaine‘s welfare. I can tell you that I have needed additional home healthcare that is out of pocket expense and it is expensive. Healthcare costs, in general, are on their rise.
Bless you, Jonathan, as you have faithfully prepared for and discharged your obligations and duties as a husband and a father. I know your wishes will be respected.
To some degree, life is about making the most of the opportunities (and gifts, God-given and others) that come our way. You are providing opportunities for your heirs to maximize the gifts you are leaving them. The rest is up to them.
As I shared in my very first HD article in 2023, we went a different route with our estate planning. Our younger daughter was then in her late 20s, and she had already exhibited major struggles with managing money and executive function in general. At that point, we had serious concerns about her blowing through an inheritance and living in poverty in her old age after we’re gone. She’s also made some bad decisions about romantic relationships, and it’s not hard to imagine a spouse or divorce causing financial complications.
We set up our trust such that if we were to both die now, she’d get 25% of her inheritance and then an additional 25% when she turns 40, 50, and 60. We have a local fiduciary hired as the trustee. They will manage the account and make disbursements. There are provisions where the trustee can tap the account for extra expenses, like for a health crisis. We hired a trustee, even though it will cost our estate some money, so that no family member has to navigate any feelings she might have about how it’s set up.
We haven’t told her about this set-up and we’re not sure if we ever will. Maybe. It’s our money and our decision. If we were to tell her now, she’d understand why, and we don’t need to throw her past mistakes in her face at this point. And assuming we’re still around for years, maybe decades, we can always change the terms of the trust if things stabilize with her. (I’m no MD, but I think ADHD medication might be a step in that direction.)
Is all this a bit controlling? Yes. Do we have reasons not to trust that she’d handle a windfall well? Also yes.
Once again, we see how every family is different. We have a standard A/B trust in that whichever of us goes first, the estate is left to the other, then going to the kids once the second spouse passes. We trust each other not to disinherit our kids, even though both of our fathers remarried and then disinherited us in favor of our stepmothers.
My daughters got a small inheritance when a close aunt passed, low five figures. One blew the lot in short order and didn’t really know where it went; the other was more meaningful with the money
Our daughter received a substantial insurance settlement after being injured in the first of two car accidents. She blew through it in a ridiculously short amount of time. There was nothing we could say—it was her money. That real-time experience very much guided how we set up our estate.
Sounds like a very well thought through plan. I’m sure in the context of understanding your love for her in any stable phase your daughter will appreciate the pragmatism of what you are planning. I know if I had a habit of blowing through money I’d probably ask that it gets released to me gradually. As for telling her I guess I would before it is too late to avoid shock and resentment but that might be at first death rather than a “today” issue. As you say if she improves it may not be necessary..
Perhaps to help her understand the management of money more you might want to tell her that any inheritance will not come in a lump sum. But over a period of several years.
Sounds the ideal way of handling it and with reasonable behaviour from all and clarity of your wishes it will hopefully work out.
But do agree with the comment that you can’t anticipate for the arrival of actors who may not be on the scene yet but exert future influence – spouses who take a rather more “entitled” attitude to a family inheritance or a spend it on us rather than your stepkids approach. I guess it’s best to be at ease with that possibility and trust that it won’t manifest.
Jonathan, thanks for sharing this. It’s something many of us will have to face. I’ve led, or helped, settle 5 estates – my parents, my in-laws, and my wife’s aunt. We had no familial issues with any of them. We are lucky to siblings that get along – I attribute that to my parents and in-laws.
Vicky and I updated our estate documents in 2015 after her mother died. The estate attorney was new to us, although we had a mutual friend. She interviewed us for quite a while, asking probing questions about our family and children. After about 45 minutes she declared that she was comfortable with our choice of our sons as executors and POAs for us. She explained her extensive and sad experience with difficult family dynamics and how it played out. It was an interesting experience and we appreciated her probing and unbiased assessment of our estate planning.
I think the honesty and transparency you’ve exhibited with your family will help whenever the time comes.
I have no control over how our heirs will use the money we bequeath.
We’re donating most to a variety of charities. The children would use it for something frivolous. Why not? After all, it is found money. I’d never attach any strings to it. They’ll either make good decisions or not. They are adults. They’ll live with any consequences.
We’ve culled the list of charities because it seems some cannot be trusted, either. Some do good work, others spend much of the donations they receive on bloat. Frankly, I’d rather give to the children so they can buy “toys” than provide a donation to some of these non-profits. (see Charitywatch.org for some ratings).
There is the risk, but why are you apparently confident your children won’t use your money, say to pay off a mortgage or for retirement?
The children are in substantially better financial positions than I was at their ages. In their 40s, the houses are paid for and the retirement portfolios are large, for example. Having dealt with the essentials they are inclined to value experiences. Think expensive travel, etc. I have a high degree of certainty that’s where any inheritance would go. My death could be like winning a lottery and why not? It would be discretionary, excess income and yes, they might save it so as to accumulate sufficient funds for a big ticket item. One of them might be the first in the family to get into space. (Not via Bezos’ pogo stick joke). However, I’m not inclined to have an inheritance spent creating memories that way, so we are gifting most to a variety of charities where we think it will do some good and make a small difference.
I have the same hope for wise use of our legacy, and no quibbling but I am not sure I have the same confidence you do. One word says it all spouses.
Married children add much complexity to the situation over which we have no control. Our children’s good financial habits may not matter.
I would not tell beneficiaries how to use the money, but I would be sure how and when it is allocated and distributed is made as clear and legal as possible.
This post could generate reams of stories of family squabbles and will-breaking lawsuits, but I hope it doesn’t. Instead, maybe we’ll read about families that supported each other after the death of their parents and amicably settled the estate. I wish that for yours, Jonathan.
Edit: When Sharon and I sat down with our estate attorney, I came with a complicated plan of inheritance for our one child. Our attorney gently discouraged me, citing his experience of how people actually behave, rather than how I imagined they would. He called our family “boring”, unlikely to produce any drama. I suspect the Clements family shares that quality with us, in similar context.
Like Dr. Lefty above, we did step up a step-wise disbursal of money, overseen by a trusted advisor, but the money goes to our daughter much more quickly. I think your children are past the age of our last step.
Jonathan, your reflections are moving and insightful. Your trust in your family and your focus on their harmony over control are truly wonderful. Thank you for sharing such personal thoughts and wisdom. I hope I can be as wise in the future.