inheritance 91024Rock musician Sting recently announced that his children will not inherit his estimated $300 million fortune, saying these riches are “albatrosses around their necks.”

The product of a British working class background, Sting is currently one of the world’s wealthiest musicians, but says he will not be passing that fortune on to his six children. In an interview with the Daily Mail, Sting said,

“I told them there won’t be much money left because we are spending it! We have a lot of commitments. What comes in we spend, and there isn’t much left. I certainly don’t want to leave them trust funds that are albatrosses round their necks. They have to work. All my kids know that and they rarely ask me for anything, which I really respect and appreciate.”

While this may sound a bit harsh, Sting’s concerns about inherited wealth are not uncommon among parents (wealthy or not) who wrestle with whether bestowing wealth upon their children or grandchildren will be a blessing or a curse.

Fortunately, for parents and grandparents with these concerns, estate planning does offer a valuable tool: a Wealth Creation trust, prepared using incentive provisions.

A Wealth Creation Trust with incentive provisions allows you to pass along your values along with your wealth by attaching incentives to the distribution of your assets. For example, if grandparents want to pass on wealth to grandchildren but want to be sure those grandchildren get a good education so they know how to handle their inheritance wisely, they can set up a Wealth Creation Trust that names scholastic circumstances under which the assets will be distributed.

If your desire is to nurture your children’s entrepreneurial spirit, you can establish a Wealth Creation Trust to provide funding for a business startup, which allows you to foster that spirit while passing on your values regarding the benefits of hard work.

While most parents want to leave something behind for their children, passing along a solid set of values as well as inherited wealth is generally the desired outcome. A Wealth Creation Trust allows parents and grandparents to accomplish this worthy goal.

If the idea behind a Wealth Creation Trust resonates with you, call our office to schedule a time for us to sit down and talk about a Family Wealth Planning Session, where we can identify the best ways to ensure you leave a legacy of love, values, and financial security for your family.

inheritance 91024Most parents love their children unconditionally and want to do whatever they can to smooth life’s rough patches for them. But that unconditional love doesn’t necessarily mean parents should unconditionally trust their children when it comes to leaving a hefty inheritance.

Here are some smart ways parents can pass their love along while still protecting the wealth they have spent their lifetimes working hard to accumulate:

Annual exclusion gift test. A parent can gift up to $14,000 every year to each child without incurring gift taxes; both parents together can give a total of $28,000 to each child. You can use this annual exclusion gift to test the waters on how your children will handle a financial windfall. Do they pay off debt, save it or place it on the ponies? Their actions can give you insight into how they might handle their inheritance.

Incentive trust. Parents that have worked hard to accumulate their wealth often worry that a large inheritance may harm a child’s ambition to succeed on their own. If that is a worry for you, an incentive trust allows you to set goals or milestones for your children to achieve before distributions are made.

Staged distributions. Parents can create a trust with the distributions tied to different ages, stages, or life events (graduating college, starting a business) so the inheritance is doled out over time.

Leave a legacy. Creating a personal foundation to support the causes you believe in, and involving your children early on in that foundation, will help them learn about the responsibilities that come with wealth and create empathy for a world outside their own.

Hold the cash. Instead of giving cash directly to your children, consider alternative giving strategies, like paying down their college or home loan mortgage debt. This will make a big difference to their financial future without tempting them with large amounts of cash.

Wealth creation trust. As mentioned in a previous post, one of the best ways your unconditional love can be expressed to a child or grandchild is through the establishment of a wealth creation trust to commemorate a birth, milestone birthday, or event, and then directing monetary gifts to the trust over time.

When your child gets to be an age specified in the Trust, he or she can step into the role of Co-Trustee of the Trust, learning how to operate the trust and best utilize the funds in the Trust. He or she will be trained on the best types of investment for the Trust, learn the purpose of the Trust (to encourage the creation of wealth from one generation to the next, rather than the squandering or wasting of assets); how to protect it (keep the investments in the name of the Trust, regardless of how funds are used, so always title investments properly and sign on behalf of the Trust); and how to create more wealth in the future using the Trust assets.

One of the main goals of my law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call my office today to schedule a time for us to sit down and talk so we can identify the best strategies for you to ensure your family receives a legacy of love and financial security.