Don’t let the kids squan­der their in­her­i­tance

There are ways to pro­tect your life sav­ings from be­ing squan­dered

The Guardian (Charlottetown) - - BUSINESS - Dick Young

Over the next sev­eral decades, it’s es­ti­mated that Baby Boomers will pass down $30 tril­lion in as­sets to fu­ture gen­er­a­tions*. If you shud­der to think what your beloved kids may do with the money you worked so hard to build, you’re not alone.

Re­search shows that in­her­i­tances dwin­dle sig­nif­i­cantly in the first few years of some­one re­ceiv­ing one, with one study find­ing that one in three Amer­i­cans who re­ceive an in­her­i­tance have neg­a­tive sav­ings within two years of the event**.

For­tu­nately, there are ways to pro­tect your life sav­ings from be­ing squan­dered.

Put your wishes in a will Cre­ate a clearly de­fined will, list­ing who gets what as­sets, if a trust should be set up to help ad­min­is­ter those as­sets, and who the trustee should be.

Trust the tes­ta­men­tary trust - The best way to main­tain con­trol over your as­sets in death is to spec­ify in your will that you want a dis­cre­tionary tes­ta­men­tary trust cre­ated. The trustee, ap­pointed in your will – typ­i­cally a re­spon­si­ble fam­ily mem­ber -- would then de­cide when the ben­e­fi­ciary should re­ceive as­sets from the trust.

Ex­plore an an­nu­ity - If there’s no ob­vi­ous trustee to over­see a tes­ta­men­tary trust, then you can in­struct the ex­ecu­tor of your es­tate to pur­chase an an­nu­ity for ben­e­fi­cia­ries. The ex­ecu­tor would take a lump sum of money from the es­tate and pur­chase that in­vest­ment. The an­nu­ity’s pay­ments would then go to the child. This op­tion isn’t as flex­i­ble as a trust and shouldn’t be your first choice, but it can come in handy if you can’t choose a trustee or if you think the trustee won’t com­mit to over­see­ing a trust for an ex­tended pe­riod of time.

Give gifts while you’re still alive - An­other way to main­tain con­trol is to par­cel out money while you’re still alive. Not only can it be re­ward­ing to see your chil­dren en­joy their in­her­i­tance, but you can con­trol who gets what when. There are risks to this ap­proach in­clud­ing giv­ing out too much money and then not be­ing able to cover your own liv­ing ex­penses.

Teach your chil­dren about money - The best line of de­fence might have noth­ing to do with wills or trusts at all – if you teach your kids from an early age how to be re­spon­si­ble with money, they’ll be less likely to blow their in­her­i­tance.

Be sure to talk to your kids about your will, your es­tate plan and bring them into the con­ver­sa­tion with your pro­fes­sional ad­vi­sor.

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This col­umn, writ­ten and pub­lished by In­vestors Group Fi­nan­cial Ser­vices Inc. (in Québec – a Fi­nan­cial Ser­vices Firm), and In­vestors Group Se­cu­ri­ties Inc. (in Québec, a firm in Fi­nan­cial Plan­ning) presents gen­eral in­for­ma­tion only and is not a so­lic­i­ta­tion to buy or sell any investments. Con­tact your own ad­vi­sor for spe­cific ad­vice about your cir­cum­stances. For more in­for­ma­tion on this topic please con­tact your In­vestors Group Con­sul­tant.

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