Tuesday, June 10, 2025
LBNN
  • Business
  • Markets
  • Politics
  • Crypto
  • Finance
  • Energy
  • Technology
  • Taxes
  • Creator Economy
  • Wealth Management
  • Documentaries
No Result
View All Result
LBNN

Will My Children Inherit Too Much?

Simon Osuji by Simon Osuji
April 19, 2025
in Taxes
0
Will My Children Inherit Too Much?
0
SHARES
3
VIEWS
Share on FacebookShare on Twitter



Some parents worry that leaving too much money to their children could hinder their growth or well-being. But what constitutes “too much” is deeply personal.

For some, it’s about fostering a strong work ethic; for others, concerns may center around reckless spending, substance abuse or values misalignment. Since no two families are alike, estate planning requires a tailored approach.

Related posts

Opening Blows in Transfer Pricing Case Where SARS Fights for Additional R1 Billion of Taxable Income

Opening Blows in Transfer Pricing Case Where SARS Fights for Additional R1 Billion of Taxable Income

June 5, 2025
ATAF and AfDB Strengthen Partnership for Africa’s Financial Sustainability

ATAF and AfDB Strengthen Partnership for Africa’s Financial Sustainability

June 5, 2025

Lifetime gifting

One practical way to manage inheritance is through lifetime gifting. The annual gift tax exclusion allows individuals to transfer up to $19,000 per person in 2025 ($38,000 for married couples) without tapping into their lifetime exemption. Annual exclusion gifts can be in the form of cash, stock or other assets.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.

Profit and prosper with the best of expert advice – straight to your e-mail.

If you’d like to gift additional funds, you can dip into your lifetime exemption, which in 2025 is $13.99 million per person or $27.98 million per married couple.

In addition, you can also make payments directly for things like education and medical expenses, which don’t count against the annual exclusion or the lifetime exemption.

Gifting during your lifetime also allows you to observe how your children handle money. Do they spend it responsibly or splurge on luxuries?

One of our clients helped both of his adult sons purchase homes, despite differing financial circumstances. He gifted them equal amounts but was initially concerned that his son in a lower-cost city would receive “more than he needed.”

A candid conversation helped set expectations, ensuring the son appreciated the gift without viewing his father as an unlimited source of funds. This approach balanced fairness with financial boundaries.

Irrevocable trusts: The basics

For those who want more control over wealth distribution, irrevocable trusts offer a structured approach. There are many types of irrevocable trusts, so we can start with the basics.

It’s possible to set up an irrevocable trust during your lifetime or as part of your estate plan at death, and control how and when the assets are distributed. A trustee manages the assets for the benefit of designated beneficiaries according to the trust’s terms.

Assets in the trust are generally protected from creditors. These trusts allow you to dictate when and how assets are distributed, improving long-term financial security for your heirs.

While irrevocable trusts provide structure, they also limit flexibility, making it important to consider provisions that account for future changes.

Incentive trusts

If you want to guide, rather than dictate, how your children use their inheritance, incentive trusts offer a middle ground. These trusts set conditions for distributions, such as achieving a certain income level, completing a degree or maintaining employment.

While they can reinforce positive behaviors, overly rigid restrictions risk causing resentment or becoming impractical over time.

Some trusts include stipulations around personal choices, such as religious practices or lifestyle decisions, but enforcing such provisions can be legally complex and emotionally fraught. Ideally, the objective is to encourage positive behavior, not micromanage or control every event.

The pitfalls of overly restrictive planning

While protecting wealth is important, too much control can backfire. One client inherited a sizable sum but was limited to withdrawing just 4% per year from an irrevocable trust.

Despite earning a decent salary, the restricted distributions weren’t enough to cover his family’s modest remodel of their home. The client ended up resenting his late mother for not believing in him to responsibly handle the inheritance.

This example underscores the importance of considering real-world financial needs, future inflation and potential lifestyle changes when building restrictions into irrevocable trusts.

Other vehicles

Many parents are happy to be generous with children and grandchildren if gifts are used for education. Add a 529 plan or plans to your gifting legacy as a means of building educational value for successive generations.

A 529 is not a trust, but it is a tax-free vehicle as long as funds are used for education expenses. We worked with a client who chose to fund 529 plans for his children, grandchildren, as well as his cousin’s children.

A dynasty 529 plan allows wealth to be transferred tax-efficiently while growing tax-free for future educational expenses. These plans can be passed down to children and grandchildren, helping families combat rising education costs while maintaining control over the funds.

Trust-owned 529s provide additional flexibility, allowing the trustee to change family beneficiaries and oversee additional contributions.

While tax implications may arise when changing beneficiaries or ownership, a dynasty 529 plan acts as a powerful tool for preserving wealth and reinforcing a lasting commitment to education.

Communication is key

We encourage clear, open conversations around wealth transfers. If you have specific concerns about your children’s financial habits, discussing your intentions in advance can help prevent misunderstandings and resentment.

Ultimately, your legacy is about more than money — it’s about how your loved ones think and feel about you when you’re gone.

With thoughtful planning and honest communication, you can create an estate plan that supports your children’s success while preserving family harmony.

Related Content

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.



Source link

Previous Post

Gunmen Disguised as Soldiers Kill 12 People at Ecuador Cockfight

Next Post

NGO urges govts to prioritise data analysis for effective environmental monitoring – EnviroNews

Next Post
NGO urges govts to prioritise data analysis for effective environmental monitoring – EnviroNews

NGO urges govts to prioritise data analysis for effective environmental monitoring - EnviroNews

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

RECOMMENDED NEWS

The D Brief: More DOD turmoil; US warns on Chinese sats; Nordics’ emerging power; Army’s new radar; And a bit more.

The D Brief: More DOD turmoil; US warns on Chinese sats; Nordics’ emerging power; Army’s new radar; And a bit more.

2 months ago
Why the National Thoroughbred League Is a Sports Investment Unicorn in the Making

Why the National Thoroughbred League Is a Sports Investment Unicorn in the Making

1 month ago
Reuters hosts Energy Transition Europe 2023 in London

Reuters hosts Energy Transition Europe 2023 in London

2 years ago
Economic Community of West African States (ECOWAS) and the European Union Together for the Road to Schuman Forum on Security and Defence in Abuja

Economic Community of West African States (ECOWAS) and the European Union Together for the Road to Schuman Forum on Security and Defence in Abuja

1 year ago

POPULAR NEWS

  • Ghana to build three oil refineries, five petrochemical plants in energy sector overhaul

    Ghana to build three oil refineries, five petrochemical plants in energy sector overhaul

    0 shares
    Share 0 Tweet 0
  • When Will SHIB Reach $1? Here’s What ChatGPT Says

    0 shares
    Share 0 Tweet 0
  • Matthew Slater, son of Jackson State great, happy to see HBCUs back at the forefront

    0 shares
    Share 0 Tweet 0
  • Dolly Varden Focuses on Adding Ounces the Remainder of 2023

    0 shares
    Share 0 Tweet 0
  • US Dollar Might Fall To 96-97 Range in March 2024

    0 shares
    Share 0 Tweet 0
  • Privacy Policy
  • Contact

© 2023 LBNN - All rights reserved.

No Result
View All Result
  • Home
  • Business
  • Politics
  • Markets
  • Crypto
  • Economics
    • Manufacturing
    • Real Estate
    • Infrastructure
  • Finance
  • Energy
  • Creator Economy
  • Wealth Management
  • Taxes
  • Telecoms
  • Military & Defense
  • Careers
  • Technology
  • Artificial Intelligence
  • Investigative journalism
  • Art & Culture
  • Documentaries
  • Quizzes
    • Enneagram quiz
  • Newsletters
    • LBNN Newsletter
    • Divergent Capitalist

© 2023 LBNN - All rights reserved.