Dividing your estate equitably among adult children is a key aspect of inheritance planning. For most parents "Fair" doesn't always mean equal shares. It is important to decide how much each child should receive or what you want to devise.

Some worry about spoiling their children by leaving too much money. They want them financially secure, but not so wealthy they become unproductive. For instance, you might give more to a teacher than a successful child, or compensate a bit more to a primary caregiver.

So, instead of giving everything to their children consider leaving inheritances for future generations through trusts or charitable contributions.

This article briefly reviews your options for leaving assets such as how and when your children should receive their inheritance.

Gift Now, Enjoy Together:

Those who practice gifting early to children or grandchildren offer the joy of witnessing the impact. It can help them buy a home, start a business, raise children, or finance college. This also provides a glimpse into their financial responsibility, whether they are responsible or not.

Lump Sum Distribution:

A lump sum may seem ideal for responsible adult children, especially older ones. However, beneficiaries in the future can lose assets to creditors, lawsuits, or divorce settlements. Even spouses can access jointly held accounts. This option may not be suitable if you worry about irresponsible spending, creditor claims, or assets going to your in-law's hands.

Staged Inheritances:

Spreading out the inheritance allows your children multiple opportunities to manage it wisely. Distributions can be made at certain intervals (e.g., thirds at death, five years later, and ten years later) or tied to age milestones (e.g., 25, 30, and 35). This lets you regularly review and adjust the plan as needed.  For instance, if you live longer than expected, your children might not survive to receive the full inheritance, or they may pass the designated ages and receive a lump sum by default.

Similar to lump sums, the installment distribution method can leave assets vulnerable. Remember the potential for divorce, lawsuits, or poor financial decisions. 

Trust Advantages:

A trust allows you to provide for your children and grandchildren without directly giving them the assets. Assets in a trust are protected from creditors, lawsuits, irresponsible spending, and current or former spouses. A trust can also benefit a child with special needs without jeopardizing government benefits. It can even incentivize responsible behavior by matching earned income (though considering potential disability or retirement). If a child is financially secure, the trust can benefit future generations while providing a safety net should their circumstances change. This is what we refer to as a win-win structure.

Why Consult With an Estate Planning Attorney

There is no right way to leave assets to your adult children. Many people may choose to leave their assets in trust for the benefit of their children or grandchildren for various reasons. Yet, this is not the only option available to you. 

Regardless of your choice, it will be great if you seek an opinion from an estate planning professional.

Estate Planner Attorney Kamilah Henderson is here to help you have peace of mind and financial security for you and your loved ones.

We serve the Estate Planning Needs of Frisco, Dallas, Plano, McKinney, and Allen in Texas.