Whenever I start the topic on estate planning, inheritance distribution, I get response along the lines of "I don't want to leave so much money behind for my kids, they need to work for it, if they are capable, they can earn their own money."
This thinking process seems to make sense. The common assumption is children needs hardship to thrive. Making them born comfortable or retired (if you are extremely wealthy) seems like a terrible idea.
In this article, I share why estate planning or inheritance planning has very little contribution to whether you get lazy unmotivated second generation. I'll also be sharing some effective ways inheritance planning can help them in case your children really turn out average.
Inheritance does not make your children lazy or eventual wealth squanders, a lousy upbringing and lack of wealth management exposure does
Parents like to think it is their money that makes their children lazy or incompetent. In my opinion, this is another way of absolving themselves from scrutiny in terms of how they bring up their children. A lot of times, parents some how also expect their children to automatically know how to manage money yet avoid topics of discussion around money.
Is it really their wealth that made their kids lose the drive to become a person of value or is it the upbringing and lack of wealth management exposure?
To prove the point that it's not the wealth who is the culprit, take a look at this news article from the Straits Times.
Clearly, the widow grew up in hardship, the children aren't growing up in the best conditions, are they more likely to succeed with their $1 million dollars insurance pay outs and donations from the public? The answer from the article is pretty telling.
There are many other statistics supporting how people living in poverty struggle to turn their lives around and lottery winners who squander their winnings.
It's not the money that breeds lazy, unmotivated children. Rather, it's the upbringing and exposure the children goes through.
If your Children are not the cream of the crop, all the more inheritance planning matters!
Unlike in a corporate environment where you can list down specifications of what kind of employees you wish to hire and fire, you can't choose your children. At best, you can influence their development through the education, upbringing environment and life opportunities.
In the event they did their best but still prove to be average, not planning out your estate matters properly does not automatically make them more capable as a result of your decision. On the other hand, poor decision making on your wealth matters might leave them with little or no support (especially if they aren't as capable as you are).
Some ways Inheritance Planning Can Help Your Children
Your funds can be segregated into an initial learning fund and an eventual support fund.
There are ways to structure the disbursement of funds in the event you are not around. Naturally, during the discussion of estate planning, a rock solid plan can make provisions to set aside funds for your children to test out ideas and grow from. If you lead a long life, some of these strategies can even be carried out while you are alive to prepare your children to become good decision makers.
Let's face it. If we agree it's the child's development that determine their perspective about hard work, grit and proper wealth management, then it makes more sense to give them the support to develop these capabilities than to set aside less for them.
Inheritance planning can structure funds disbursement in stages and it can also be designed to ensure the one inheriting the monies to only get access to certain funds when they hit certain milestones. This way, one need not fear an unnecessary mismanagement of wealth and design a way to motivate those inheriting your wealth to improve themselves. This is especially useful for minors when unexpected events leave them orphaned.
It gives them a more equalizing playing field
Whether one realizes it or not, there's quite a bit of old money flowing to the second generation within Singapore in the next decade. When there's a huge transfer of wealth happening within a country or region, it's inevitable things get inflated.
It can be argued that such a reasoning towards inheritance planning seems flawed because the socio-economic divide would only widen. This is why inheritance planning should not be limited to the wealthy. Capitalizing on one's eventuality might be a strategy to help your next generation stay competitive on top of the education they receive. Inheritance planning is more than wealth distribution. Sometimes, these discussions entail wealth creation so that there's wealth to distribute.
It really ensures your kids won't squander what you leave behind
People who reject doing any inheritance planning with the convenient excuse that their children will squander their wealth if they are incompetent seem to forget that this is going to happen anyway, if they don't put in systems to prevent it or make a will to donate their assets away when they pass on.
The truth is, their children is going to inherit what's left even if they did nothing. If their assumption that their kids cannot handle wealth is true, leaving all the assets behind with absolute free play to the kids via the Intestate Succession Act would probably expedite the squandering of the wealth.
Doing nothing doesn't make the children wiser right?
What might be more effective could be to put in place a structure which ensures that the children get a controlled yearly income and stipulate some conditions in which bigger sums of money could be used under fixed circumstance like healthcare. This way, your children can be taken cared of and your money won't be squandered.
Summary
In closing, I hope today's article illustrated why it's not the money you cater to your next generation that determine whether you get capable children or not. However, if your children really turn out average, then inheritance planning matters even more!
Some benefits of inheritance planning that most people are not aware of includes how it is possible to stipulate the use and disbursement of the funds you leave behind and putting in place strategies to create and grow the wealth prior to distributing it.
After reading this article, you may have some questions or may want to find out more about inheritance planning through a conversation with me. You can reach me by dropping me a message.
Be sure to share the article if you feel this information is helpful. You will enable a lot more people to learn about inheritance/estate planning.
About Janice
I specialize in portfolio optimization (ensuring you get maximum value for every dollar you put in) and retirement planning.
Clients look for me primarily to outsource their retirement planning needs so that they can focus on other aspects of life that interests them. Many of whom are very good in earning their incomes in their respective professions and wish to ensure their monies continue to work harder while they focus on what they are good at. Refer to client testimonials here.
I've helped many clients who are referred to me reduce the costs they are paying for their insurance or help provide solutions when they deem they are stuck with huge commitments bought when they were younger but unsuitable for their present life stages. You can reach me at 94313076 or my social media accounts on Facebook and Instagram.
Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
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