There is a great chance your children will lose your wealth

by | Apr 19, 2019 | Estate Planning |

As a parent, nothing feels as important to you as taking care of your children. You feel like you can keep doing that after you pass away. You can leave them your money and other assets, giving them financial security. You see your estate plan as one more way to provide for them and help them have the life you always wanted for them.

That may work, but here’s the reality: They’re probably going to waste that money. Did you know that wealthy families lose the wealth as it passes through the second generation in a stunning 70% of cases?

By the next generation, that percentage is all the way up to 90. So, as much care as you took saving up that money for your family, your children will most likely squander it, and it’s all but a guarantee that your grandchildren will lose anything that remains.

Why does it happen?

The reasons that this happens are unique for every family. For instance, maybe you have a child who has an addictive personality. They could get addicted to gambling, alcohol or drugs. No matter what it is, they will funnel all of their new wealth into that addiction.

One of the biggest issues, though, is simply that your kids did not earn that money. They grew up with it. To them, it feels like “free” money when it passes on to them, and so they tend to be careless. They don’t respect it the way that you did. That’s even more common with grandchildren. This mental approach may cause them to waste what you earned.

What can you do?

Can you prevent it? Not necessarily. Your children make their own choices as adults. Those choices are out of your hands.

That said, there are some estate planning options to protect your wealth. Namely, you can use trusts to determine how they use the money and when they get it.

Worried that they’ll waste more of it if they get it when they’re young? Put the money in a trust that doesn’t pay out before they turn 35.

Worried that they won’t use the money to go to college, even though you want them to get an education? Put it in a trust that says a certain amount can only go for tuition.

Nothing is foolproof. Just because someone is 35 years old doesn’t mean they’ll make great choices. But you can still have some control. You can attempt to limit the amount of money that gets lost based on what your family needs and what specific issues they face.

If that’s something you want to do, make sure you know what legal steps to take in Wisconsin.


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