In Your Interest: Children’s Inheritance

Many people today look forward to retirement, and are working hard to save money for that day. Hopefully, you will retire with plenty to live on, and not have to worry about depleting your savings during your lifetime. If that is the case, then your children will stand to inherit a nice sum of money, as well as your house, life insurance, and your personal items. Have you thought about how they might treat this inheritance when they receive it? In America, the average length of time it takes a child to go through a parent’s inheritance is 18 months. That’s not very long, considering how long it took you to build it up.

Many times, when someone inherits a large sum of money, they may make very unwise purchase decisions. For example, they may purchase a nice house, car, etc., but then not have the funds to maintain them, leading to financial trouble in the future. Others may have already run up large credit card debts, and quickly use the money to pay the bills off. Being rid of that debt is nice, but if they didn’t learn their lesson about controlling spending, they will quickly fall into the trap again, only this time without anything to help them get out. In addition, if the money they are spending quickly is coming from your retirement account, they will face a huge tax bill, up to almost 50 percent of the withdrawn amount.

Proverbs 20:21 tells us that “an inheritance gained quickly in the beginning will not be blessed in the end.” How can you help your children make the most of their inheritance? One way is to control their spending by planning how much and how often your assets are distributed to them. Typically, this is done by placing some or all of your assets in a trust through your will. With a trust, you can determine how much and how often your children will receive payments from your estate after you pass away. Trust payments can be made to your children for several years, or even for the rest of their lives.

If you want to find out more about how to make the most of your children’s inheritance, contact your attorney or the Baptist Foundation of South Carolina. They can show you ways to structure your estate so that your children’s inheritance is “blessed in the end.”

— In accordance with IRS Circular 230, any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.