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Many parents don't plan to leave an inheritance to their children, but it can be meaningful and important for long-term financial success. Outright inheritance can be easy, but there's a gap between what people say they'll do with it and what they actually do. Money can disappear quickly due to poor decisions or scams. Debt and incapacity can also complicate things. It's important to consider the financial habits and needs of each individual when deciding who should receive an inheritance. Thoughtful planning and estate planning tools can provide oversight and protection. Have conversations with your family, be open about intentions, and seek help from estate planning professionals. Remember, decisions can be adjusted over time and it's important to consider how you leave your legacy. Peace of mind is for today, so start planning now. Hello, and welcome back to Living With Your Bags Pack, I'm your host, Robert Newman, and a fifth-rank attorney licensed in Maryland and the District Court. And today we're diving into one of the most personal, and frankly, most overlooked questions in the State Department. How do you leave your money behind? It's a question that seems quite simple, but once you scratch the surface, you realize it's anything but simple. Let's start with a reality check. Americans are living longer. I mean, they're spending much more time, more money in retirement. And despite this, many parents don't intend to leave inheritance to their children. The amount may vary depending on the family circumstances and overall wealth, but whether it's large or small, inheritance can be meaningful. It could be the key to long-term financial success if the person receiving it is ready to handle that kind of responsibility. But that's a big if. Most families never talk about inheritance planning. No real conversation about what's coming, what to expect, or how to handle it. Parents need to make a critical decision how they want to pass down their assets. That includes everything, bank accounts, property, investments, et cetera. And whether they want to pass down that wealth outright or in a more controlled way is something else they need to consider. Let's talk about the idea of outright inheritance for a minute. It's fast. It's easy. No frills. No strings. When someone receives an outright distribution, they can do whatever they want with the money or the property. They can pay off loans, invest it, go on vacations, buy a house, or all of the above, depending if there's enough of it. It's their call. And for some beneficiaries, that works perfectly. In fact, according to a USA Today survey, about 76 of Americans who expect to receive inheritance plan to save it or invest it. Forty percent say, in addition, they will use it to pay off debt, and 21 percent want to pass it on to their kids. Now, that sounds responsible, right? But here's where it gets tricky. There's a gap between what people say they'll do with an inheritance and what they will actually do once they receive it. More than a quarter of people told the USA Today that they'd use their inheritance for luxury spending or travel, and 72 percent admitted they're not really prepared to manage an inheritance if in the first place. So the question becomes, is an outright inheritance actually in your loved one's best interest? That's an important question for every parent. Even if they have the best intentions to budget, invest, and spend wisely, the reality is that money can disappear quickly. It can be eaten up by poor decisions, risky investments, or worse, financial scams. And there's another problem. If your loved one is carrying debt, which many young adults are, a creditor might step in and grab an inheritance before your child even sees a penny of it. What about situations where your beneficiary isn't legally able to manage their own money? If they're a minor, for example, or someone who's incapacitated and doesn't have financial power of attorney in place, then the court has to get involved. That means appointing a conservator, someone who manages the inheritance on their behalf. Not exactly a quick or stress-free process. Now, I'm not saying outright distributions are inherently bad. Please, don't confuse what I'm saying. For the right person, they can be great. But deciding who the right person is, that takes thought. Even within the same family, children can have wildly different financial habits. One child may be a budgeting pro with a diversified investment portfolio. Another child may have some real estate. And another one might be living paycheck to paycheck, unsure how they're going to make the next rent payment. As a parent, you might even find yourself needing to protect your child from their own habits. A recent survey from Northwestern Mutual found that two-thirds of people who plan to leave the inheritance consider it their single most important financial goal, or at least very important. That's a powerful thing. You're not just leaving money. You're leaving an impact. I mean, you're actually creating a legacy. So given the importance of these decisions, it's not surprising that there's a lot of anxiety when it comes to thinking about this kind of stuff. I mean, six in 10 parents say their children don't share the same values around financial responsibility as they do. And more than half worry that this gap could ultimately drain the family's assets after the parents are gone. I mean, that's a valid concern. I mean, only a quarter of adults say that they feel confident in the wealth transfer process. Well, that's where thoughtful planning makes a difference. If you're considering leaving an inheritance to your child or another loved one, start by understanding where they are. What's their current financial situation? What are their goals? What are their values? Are they trying to pay off student loans, buy a home, save for their own kids' education, or maybe start a business? I mean, these answers actually matter, and you won't get them without a conversation. So talk to your family. Be open about your intentions. Ask questions. Share your values. And consider whether some structure around an inheritance might actually be a gift in and of itself. Not just the money, but the way it's passed down. There are all kinds of estate planning tools, trusts, staggered distributions, conditional gifting, that can provide oversight and protection while still giving your loved ones the benefit of what they've built. So if you're not sure where to start, and remember, you don't have to figure it out by yourself. These conversations should be had with estate planning professionals, like myself, who can help you. They can even ask you questions you haven't even considered. Never mind, you don't have to have all the answers, but at least if you're given the questions, you can begin having discussions and begin considering those kind of things. We can also walk you through the various options based on your circumstances. And we can help you think about taxes, investment strategies, budgeting after an inheritance, and even how to adjust your plan if your child's circumstances change over time. Because when it comes to legacy, it's not just about what you leave behind. It's about how you leave it and why. Finally, remember, none of your decisions are final until you're no longer able to make decisions for yourself due to incapacity or death. Just because a family member is not ready does not mean that they will never be ready. Through growth, maturity, education, and wisdom, there can be substantial change in their readiness to be responsible when they receive their inheritance. As my daughters have heard me say thousands of times, it's not how you start, it's how you finish that really matters. Well, thank you for listening to this episode of Looking into Backstop. If you found it helpful, please do me a favor to like it, share it with a friend. Better yet, talk to someone you care about and ask them if they've started their own estate plan. And if anything we discussed today has kind of sparked any thoughts or questions in you, listen, I encourage you to reach out. I'd love to have a conversation with you and your family. I'm Robert Newman, reminding you that peace of mind isn't just for some day, it's for today. Until next time, take care and plan well. Now here's my latest disclaimer. None of this is legal advice. Every situation is different and your estate plan should be tailored to your unique needs. So if you're not sure how to proceed or what makes sense for you, talk to a qualified estate planning attorney. You have to deal with it to that end. Oh
