Money is a tool that allows you to do things. Like any tool, you need to know how to use it. You need to understand how to get the maximum efficiency from it and the dangers of misusing it.
It can be easy to forget this when planning to leave someone a large inheritance. They may not have the education they need to handle such a gift well.
Education should be part of your estate planning
If your child is a 40-year-old qualified financial adviser when they receive your inheritance, they probably have the financial education they need. Yet what would happen if you die when they are 18 years of age? Would they know how to look after the money you leave them?
You can start teaching children about money from a young age. Encourage them to do tasks around the house to earn their pocket money. Let them create micro businesses of their own, such as a lemonade stand on the street on a hot day. Understanding what it takes to earn money can help them better understand its value.
You can build safeguards into your estate plan
Rather than leaving your 18-year-old money in a bank account, you could put the assets into a trust. A trustee will manage the funds according to the rules you set. You could specify your child will not receive the assets until they are old enough to know how to manage them. Or, you can stagger lump-sum payments so they cannot spend their wealth all at once. You could also put money aside to spend only on their education.
Remember that you can update your estate plan as your child grows older. You can relax the restrictions as your child acquires the knowledge and experience needed to use the wealth you leave them. An attorney can help you learn more about your options.