What kind of inheritance should you leave your children?
As parents, our natural inclination is to take care of our children. We are concerned with being fair. But in reality, when it comes to leaving an inheritance, it can be challenging to balance fairness and stewardship.
We are called to be prudent and thoughtful in our decisions to leave an inheritance for the next generation. Many expert sources conclude the average inheritance is spent in 14 to 18 months. This problem is addressed in Proverbs 20:21, “An inheritance gained hastily in the beginning will not be blessed in the end.”
In anticipation of any future wealth transfer, the first step is to communicate with your spouse. It’s critical that you and your spouse answer some tough questions.
- Do your children possess the same financial maturity? How do you decide between fiscal responsibility and fairness between beneficiaries?
- How will your children’s spouses react to an inheritance? What influence will the grandchildren have?
- If you have a blended family, what is your strategy?
The additional strategies below should be considered as you decide how you will leave your inheritance to your family and if you desire to leave more than money to your children.
Lump-sum inheritance versus ongoing income.
Your children may each have a different skill set in dealing with finances. Good or bad, these habits are already established and evident. If a person is wise in handling finances, he or she will probably be wise in handling a lump sum. If not, receiving a lump sum would most likely multiply poor decisions. It may be more practical to consider an income stream that can be a source of retirement income for your children.
Continuing support of ministry.
There are planned giving strategies available that can accomplish sustained giving for years to come. Both a Donor Advised Fund (DAF) and an Endowment allow you to provide future income for ministries of your choice at levels directed by you or an advisor—and you may even potentially receive tax benefits. These strategies can help teach stewardship to the next generation, allowing your children to participate as advisors. While your estate provides the finances, your children can determine and allocate funds using wise stewardship skills. This may be the ultimate inheritance—instilling the generosity of giving to the next generation.
Whatever your decision, it’s critical to communicate it to your family. You may want to consult with your children—or choose to simply communicate your wishes after the decision has been made. Remember that above all else, it is your choice and your lasting legacy.