Should You Leave Your Wealth To Your Children?

Money falling from one hand to another to represent an inheritance.

Find out what an estate planning attorney has to say

During a podcast recorded in September 2021, CNN anchor Anderson Cooper discussed his family and revealed that he does not plan on leaving his entire fortune to his son.

“I don’t believe in passing on huge amounts of money,” he told hosts Ashley Baker and Michael Hainey. “I don’t know what I’ll have.” Cooper said his decision was based on the negative effect money had on his family, noting that his mother, the heiress Gloria Vanderbilt, also elected not to pass on her wealth.

He is the latest in a long list of wealthy and high-profile people to make that decision, joining Daniel Craig, Sting, and Berkshire Hathaway CEO Warren Buffett. All cite similar reasons – it’s important for children to learn to make their own way in the world, they say, and the money can be put to better use through philanthropy.

But is that the approach you should take with your estate? Financial professionals point out there are other options.

Estate planning is essential

“It doesn’t have to be all or nothing. There’s a healthy in-between,” said Harry Grand, senior managing director of Angeles Private Wealth.

Most clients still follow the tradition of leaving money to their children, says Grand. A study by the personal finance site MagnifyMoney found the wealthiest families in the United States expect to inherit an average of nearly $1.7 million.

Financial professionals note that passing on wealth does not have to be done without strings. They point out that the money can be put in trusts that have specific provisions, such as requiring that the money be used for education.

Another type of trust is incentive trusts that reward the recipient when certain goals are met. One example cited by Paul Saganey of wealth-management firm Integrated Partners is a trust that paid out 25% of the recipient’s annual earnings. The more the person earned, the more money was paid out by the trust.

Saganey said incentives could be non-financial, such as choosing a career in the non-profit sector.

Work with an estate planning lawyer to set your goals

Professionals also point out that the next generation will face different challenges. For example, a bachelor’s degree may no longer be enough to succeed in certain fields and increasing real-estate prices can make it more difficult to buy a home. In addition, a grandchild born with a disability may require lifelong care that can be very expensive.

They note that money can also give children the freedom to explore their interests in life, such as starting a new career or business.

An estate planning lawyer can help you provide security for your children by creating an estate plan that also provides safeguards so the money won’t go to waste.

Attorney Yuka Hongo of Hongo Law Office, LLLC helps clients in Japan and Hawaii plan for the future. She works with families to understand their goals and needs. She then creates a plan through trusts and other tools to help protect your wealth for future generations.

Contact us today to schedule a consultation and learn more about how we can help you plan for the future.

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