When people in New York, Florida and Germany, among other locations, are preparing an estate plan, they may want to think about how an inheritance will affect their adult children. Talking openly to their children ahead of time about the plan may be the best method for ensuring that they are ready, but there are several elements that parents should consider.
Before creating an estate plan, people should examine their net worth and predict how much it is likely to increase or decrease in the years ahead. They should also consider whether there will be taxes associated with the estate, whether they will donate to charity and how their children will be affected by their inheritance.
How adult children respond
How adult children will be impacted by their inheritance depends on two factors: their temperament and their own financial situation relative to the size of the inheritance. Different people handle a sudden influx of money differently, and it may be necessary to adjust the inheritance with this in mind. If an adult child is likely to be irresponsible with an inheritance, creating a restrictive trust that allows another party to manage the money is one option, but it may not be the right one for all families.
Talking openly about finances within the family can be helpful. Some adult children may not necessarily be irresponsible but need some additional assistance with managing their finances. This help can be part of preparing them for their inheritance. Generally, people may also handle an inheritance better when they do not feel entitled to it.
An inheritance and finances that have an international component can mean an additional level of complexity. Both people creating the plan and their heirs may need assistance with understanding how laws and regulations differ between countries and how that affects them. Another advantage of talking openly with family members about the estate plan is that they can potentially be included in planning sessions along with financial professionals, providing them with more familiarity with the situation and access to helpful resources.