Many wealthy people have a legitimate fear that if they leave their children or grandchildren large inheritances, most of the wealth will be wasted. Having not earned the money on their own, the heirs might not value it as much.
They might spend it on wasteful things. They might use the wealth as an excuse not to work hard for themselves. They might make bad investments.
There are many possible scenarios that could lead to a wasted inheritance. Fears that this will happen appear to be on the rise, since in the next few decades, the largest transfer of wealth from one generation to another will occur, as Baby Boomers pass away. However, there are a few simple things that can be done to prevent any waste, as the Wills, Trusts & Estates Prof Blog discusses in "Will the Next Generation Squander the Largest Wealth Transfer in History?"
These things include:
- Talk to your potential heirs about the inheritances they will receive. Let them know how you would like them to manage it and spend it. Tell them why it is important to you that they handle their inheritances in a certain way.
- Do not focus on how much you will be leaving to your heirs. Focus on values and how handling the money properly can create a benefit for society. Leave a legacy in this way that is more than just a bank account.
- Use estate planning to prevent waste, by limiting how an inheritance can be spent and when. It’s possible to leave an inheritance that is protected for your heirs from outside circumstances and against your heirs wasting it. They can be supported in a manner that conforms with the values you’ve instilled.
Reference: Wills, Trusts & Estates Prof Blog (May 29, 2018) "Will the Next Generation Squander the Largest Wealth Transfer in History?"