You may have heard stories of very wealthy individuals deciding not to leave that wealth to their children. From Bill Gates to Jackie Chan, they’ve often decided to give their money away to charities or philanthropic causes. They’ve chosen not to simply give their children all of the money they’ve earned over the course of their life.
However, you may think of the money that you’ve earned specifically as a way for you to provide for your family. That was always your goal. So why are people deciding not to do this? What are the downsides that they worry about?
Removing all incentive
One reason that people will sometimes give is that they think leaving that much wealth to someone is going to remove any incentive for them to work. They will have enough money to retire instantly and they won’t have to do anything. This can keep them from starting a business or even pursuing their passions, like art.
As such, there are those who believe that leaving a lot of money to children is a negative for their development. Some money can certainly help them as they start a business or a family, but they need to have an incentive to continue earning.
There are other ways to do it
One thing to keep in mind is that you don’t have to cut your children out of the will in order to stop some of these things from happening. You just have to set your estate plan up properly.
For example, maybe you’re nervous that your children won’t want to work because they can retire off of your money. To ensure that they still do, you could put that money into an incentive trust. You could then stipulate that the trustee needs to look at the child’s earnings for the year and then give them one annual payment that is equal to the amount that they earned.
In this way, your money certainly still helps your children. It doubles their earnings, a huge boost for anyone in any income bracket.
Setting up your estate plan
There are always estate planning solutions to help you accomplish your goals. Just be sure you know what they are and how to use them.