Just the question alone can cause a little anxiety. Those of us who have teenagers or have raised teenagers know how challenging it can be. We know that Millennials (born between 1981 and 1985) and Generation Z (born between 1997 and 2015) have ideas and spending habits that are different than previous generations. In this blog we will discuss whether your Millennial is ready to inherit.
Soon, Millennials will be caring for their elderly parents and perhaps managing their property. With that in mind, those with Millennials should decide whether they are up to the task or whether another person should be appointed with a healthcare power of attorney or durable general power of attorney. Also, parents should consider whether your Millennial will be capable of managing their inheritance.
Millennials are currently between 22 and 38 years old. Surveys have indicated this generation has an unrealistic view of how much they will inherit and how quickly. Although nearly 70% of Millennials in a recent Natix U.S. Investor Survey reported that they expected an inheritance, only 40% of their parents planned to leave one.
Previous generations have passed on significant amounts of money to their children. However, parents and grandparents of Millennials spend more money and will not have much to leave. It has been reported that 44% of Baby Boomers, who are often parents of Millennials, do not have a last will and testament, and 57% don’t expect to have any money left to pass on.
For those who expect to leave an inheritance to your Millennial, Generation Z or other current or future young adult, either through property or life insurance proceeds, you should consider whether they are ready.
Oftentimes, parents with young children create trusts in their will in the event their minor children inherit property. This is called a testamentary trust and the property is not actually transferred to the trust until you pass away. By placing that money and/or property into a testamentary trust, you have an opportunity to control when and how your children can use the money. For example, you can state the purposes for which your child can receive the money, e.g. education, healthcare, and welfare. You can also select what age they can receive payments and what age they can have access to the full amount in the trust.
Your child may be financially responsible, but they could have other circumstances that may cause you concern if you were to give them an inheritance. Some young adults may be struggling with addictions or debt or even a bad marriage. You may fear that leaving money to them may result in the money being used in a way you did not intend. To ensure your child has their basic needs provided for and protect against the misuse of the property you leave them, a trust may be a good option.
Perhaps you do not have real property or cash to transfer to your children, but you may have life insurance. You can name your trust as the beneficiary of your life insurance proceeds instead of naming your children. You can name your children as beneficiaries of the trust. This will allow you to place restrictions and conditions on how your child can use the money left to them in the trust.
By planning, you can set your children up for success and feel comfortable that you have provided a way to care for their basic needs with an inheritance. Contact the Law Office of Hugh Spires, Jr, PLLC at 210-874-5700, email hspires@TexasWillsLawyer.com or complete a contact form on www.TexasWillsLawyer.com to discuss your estate planning needs.