A timeless article appeared recently in Forbes.com – “Giving an Inheritance The Right Way.”  Timeless because the points made in the article by Liz Davidson are true today, were true yesterday, and will be true tomorrow.


Her first point is that no matter who you are, no matter what your intelligence level, or your age – but especially true for younger people – if you are not mature and experienced in the handling of large amounts of money, the sudden gift of a large sum of money through an inheritance, or through winning the lottery, will be lost.  Ms. Davidson uses two examples: a 19 year old given $250,000 to do with as he pleases; and a bartender who wins millions in the lottery.  The 19 year old lost all of his gift of life insurance from his deceased father gave him in an act of love in a failed business venture before he was 21.  The bartender, a mature mother who’d raised three kids, won millions, and within five years was broke and had very little on which to live.

These cases are examples of too many sad but true cases.  For those who are engaged in, or have completed estate planning, the message of these situations is that there is a right way and a wrong way to transfer assets to the next generation or other loved ones.  As so accurately and succintly stated by Ms. Davidson:  “The dilemma in estate planning is how to leave a legacy for our loved ones, protect them from bad choices and allow them to benefit from the money.  Taking a few extra steps along the way can make all the difference in the world.”

Ms. Davidson provides some very inciteful steps for proper estate planning:

  • Match you inheritance to your intentions – plan to ensure that your inheritance serves the purpose you intend it to have.
  • Educate your heirs – plan jointly with your spouse, make sure your spouse knows where your assets and important documents are stored, and consider providing funds for beneficiaries while you’re alive to give them experience managing money.
  • Give guidelines – consider writing up the investment principals that made you what you are – your thoughts might get handed down for successive generations.
  • Create controls – most wealth passed from parents to children is consumed before it gets to the grandchildren.  If you want funds to be available for grandchildren or future generations, put controls in place to ensure that happens.  Talk to an estate planning attorney about the use of spendthrift trusts to protect the assets you leave from your loved ones creditors, divorcing spouses, and anyone who may try to “persuade” them to part with the assets you’ve worked and saved so hard to provide for them.
  • Pass on your values – your trust can reflect your values by providing incentives, disincentives, and other appropriate guidelines
  • Keep it flexible – choose the right trustee to manage the trust, and provide the opportunity for the trustee to exercise some discretion based on current circumstances and changes in those circumstances

Ms. Davidson concludes with what I believe is sound advice:  “Instead of just naming a beneficiary on your life insurance policy or pension, or even setting up a trust, ask yourself how they will receive income and whether they’re ready.  If not, time spent planning now will be well worth it in the years ahead.”

Invariably, when I first speak with new estate planning clients, one of the almost universal responses is “I didn’t realize there were so many things I can do to protect” my children (spouse) or other beneficiaries.  Using a trust allows you to structure any set of guidelines, controls, or values, and allows you to build in as much flexibility as may be appropriate for your family circumstances.  A trust is a contract, and can provide for anything you want to do that is not illegal.

Don’t short change yourself, or your loved ones.  Plan ahead and take the few extra steps necessary to “make all the difference in the world.”  After all, you worked for it, its yours to do with as you please, and there is every reason for you to want to have it useful and beneficial to the loved ones you leave it to.

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