When you have built up a substantial net worth, you’re in a great position to enjoy the rest of your life. However, you also have to make decisions about what’s going to happen to your money after you’re gone — and that can get complicated.
One Reddit user is currently dealing with this situation right now. The original poster (OP) explained that she is 67, her husband is 70, and the couple has a net worth of $10 million — most of which is in stocks. Her husband has one child who is 39 and married with a 10-year-old but that child can’t get his spending under control.
The Redditor isn’t sure what to do to keep the inheritance the couple plans to provide from “ruining” their lives by giving them a ton of money when they already can’t handle their finances wisely. So, what is the best course of action in this situation?
Current spending habits can cause concerns for parents leaving an inheritance
The OP said she is concerned because, while her stepson and his wife have $100K annual incomes, they have essentially no savings. She’s also found some of their financial choices to be questionable, including charging $7K on credit cards to go on a family vacation to Disney World when they were already in credit card debt.
She’s thinking about putting $5 million into a trust to provide them with funds to cover healthcare, a house, college, and a modest car — but she’s also worried that a $5 million trust would give them an extra $150K to $200K in income which is a huge increase from the amount they have now. She’s considering giving them a crash course in money management but isn’t convinced that’s enough to ensure the inheritance won’t hurt the couple.
It’s understandable here that the OP may be worried about what giving her stepson a lot of income could do to his finances since, in her view, he’s not great with money. However, as several Reddit users pointed out in the comments, a $100K annual income isn’t a ton of money in today’s day and age to support a family of three — and while putting a vacation on a credit card isn’t ideal, it’s something many people do if they are struggling a little bit with money and still want to make memories with their kids.
The OP may not know as much about their finances as she thinks, and her opinion may be clouded a bit by the fact that she says she didn’t come into her stepson’s life until he was grown up and she doesn’t think he was taught effectively about money at a young age. So, before she passes too much judgment on the couple’s money habits, she may want to have some more conversations with them and with her husband.
That’s not to say that a child’s spending habits can’t be a reason to worry about leaving an inheritance as irresponsible spending is definitely a red flag. But, that just may not be the case in this particular situation.
Choosing the right way to structure an inheritance
Regardless of whether the OP’s stepson is really as bad with money as she thinks, it’s still worth finding effective ways to structure a large inheritance.
One option may be to give the kids some help now while the parents are still alive. The OP and her husband could, for example, pay off the son’s house right now or help him get out of debt that he’s in. This might be more useful than an inheritance that comes decades in the future. She could also start a college fund for her stepson’s child.
Since there likely will still be some money left when the couple passes even if they do provide gifts, the trust idea is a good one. And the OP can work with a financial planner and estate planning expert to structure it in a way that the money must be spent wisely on certain purchases if she’s still concerned.
Getting advice is important not just for the OP but for anyone who is dealing with these issues. The right professionals can offer guidance on both gifts during your life and on effective estate planning as there are plenty of tools that allow parents to provide for the next generation while imposing conditions that protect the assets left behind.
In tricky situations like this, it’s well worth getting that professional advice as a lot of money is at stake that’s enough to change the family’s future for generations to come.
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