Think Carefully before Handing out Inheritances

I remember the very first time I held a five dollar bill of my own. I earned it by working 10 hours over two Saturdays at my Dad’s shop. When I got the job, I dreamed of the candy I would buy when payday came. But as I sat on my bed that day looking at that bill, turning it over and over and seeing those amazing big number 5’s on it, I suddenly had a difficult time deciding what to do with it. It was no longer just money waiting to be spent, but it was a valuable representation of long hours of work; Work, that would have been wasted if I wasted the money. That moment in time is fixed in my memory.
 
Our office recently received a call from a child of one of our long time clients. We had worked with the client for many years and had a very close relationship. This couple had lived a normal middle class life,  faithfully saving  a portion of their monthly income and spending wisely so that it might last throughout their retirement.
 
The phone call was very short and amounted to the child of our client informing us that their last remaining parent had passed away the night before. As the successor trustee he asked how much money the parents had left, then said that he and his three siblings wanted the account cashed out and sent to them as soon as possible.  Because Investment markets are constantly moving, it’s often not the best idea to just liquidate everything all at once, but as we tried to explain this to the trustee he made it clear that he just wanted whatever cash could be generated as quickly as possible. The tone of the call, literally hours after their parent’s death, was disturbing.
 
Sadly this situation is not uncommon. I have often thought that if parents could foresee the way their kids behave when they find out they have an inheritance coming, they might seriously reconsider how they leave money behind. There are certainly children who are not this way, but far too many are unprepared financially or emotionally to be given money they did not earn.
 
My experiences have taught me that when you work for money, when you sacrifice to save your money, you have a much greater respect for it. You tend to be more cautious about how you invest and spend it. On the other hand, it is often the case that heirs who are not financially sound themselves, can be very quick to demand their share and even quicker to spend it.
 
If your estate plans include “leaving a little something” for your kids, consider that a good example and some well-timed lessons can be much better than a big check. One of the best things my Dad ever did for me financially was to give me  the chance to earn that $5 bill, rather than just handing it to me. That lesson has blessed my entire life.