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Can I Keep My Kids From Blowing Their Inheritance?

Parents go to great lengths to protect their kids, and this includes setting aside money and property to pass on to them after parents pass away. If you are like many Pennsylvania parents, you probably want to maximize the financial gifts you leave to your kids. However, you probably also want to ensure they don't waste the inheritance you worked so hard to leave behind.

If you want to keep your heirs from blowing through large monetary gifts, then you can attach some strings to their inheritance. Below are some common "strings" you might want to consider.

  1. Create incentive trusts: One suggestion, from this Forbes article, is to make trust payouts contingent on certain achievements. You might decide to trigger payouts based on high school graduation, college graduation or participation in volunteer efforts. You might also decide that trust payouts will match a child's income, encouraging him or her to strive for individual success versus living off the trust.
  2. Stagger payments: You do not have to release the funds in a trust all at once. You can release them in increments to protect heirs from spending it all right away. 
  3. Specify or restrict usage: You can set aside money for specific purposes. For instance, some can be allocated for college tuition or a first home. You might also put a restriction on how the money can be spent, though an heir could ultimately challenge such a measure in court.
  4. Consider alternatives to leaving an inheritance: Instead of giving money, you might choose to leave your children properties or businesses they can run. With adequate preparation, these resources can provide for a child long after cash gifts might have.

These can be useful estate planning measures to exert some control over an inheritance. However, if you find yourself putting too many strings on your gifts or fretting over your children's well-being, it may be wise to reassess your goals.

Remember, too, that you can talk to your kids about your thoughts or concerns. Open communication can go a long way in allaying your worries and helping you feel confident about the decisions you are making. Together with your attorney, you can then build an estate plan that both reflects your wishes and protects your heirs.

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