New York Estate Planning & Elder Law Blog
Beneficiaries Often Treat An Inheritance As A Windfall And Spend It As Such
You spend your entire life working hard, accumulating wealth and you want to pass it onto your children, to provide for them and their families after you have passed. But will they appreciate your life’s earnings or will they blow through it without a second thought? Unfortunately, more likely than not any inheritance that you leave behind will most likely be spent much faster than it was earned, and the statistics are alarming.
“From shirtsleeves to shirtsleeves in three generations” the old saying goes and the research shows that the sentiment is true. One third of people who received an inheritance had negative savings within two years. Even if the wealth does last past the first generation to receive it, 70 percent of inheritances are completely gone by the end of the second generation.
Easy Come, Easy Go
The problem with inherited wealth is twofold, dealing both with a lack of financial knowledge and the attitude of the people who inherit it. The first generation wealthy are the ones who had to work hard to generate the wealth. These are the people who know the value of hard work. They recognize that the wealth and assets they have accumulated are a direct reflection of their time and energy and they treat the money carefully by protecting and investing it for the future.
This is not true of the attitude of the people who inherit the wealth. Those who inherit wealth most likely have not had the experiences that their parents had in creating it and how they spend it shows. The most common purchases after receiving an inheritance are real estate, a new car or a vacation. Money that is easily come by is easily lost.
How To Protect Your Assets For Future Generations
A large part of the problem may be that the beneficiaries of your wealth do not understand how to properly plan or safeguard the inheritance to make sure that it lasts for future generations. Education may be key. Few people take the time to sit down with their heirs and their financial and estate planners to explain how the wealth should be managed to last.
There are also a number of estate planning options to help ensure that an inheritance lasts for years after it has been passed on. A well drafted trust can hold the family wealth for future generations while disbursing funds at certain intervals or attaching requirements to the use of the funds Trusts may also protect your heirs from their bad spending habits, their creditors and bankruptcy.
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