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Navigating the Appropriate Inheritance Amount

Is it possible to receive too large of an inheritance? Of course most community members want their family members and friends to be helped in various way by receiving an inheritance. However, few want that inheritance to fundamentally alter the character-building efforts of the recipient or to come with more baggage than necessary. It is not always easy to determine how to most appropriately split an inhertiance between different indiviuals and outside causes. As with everything related to estate planning, careful thought must be involved. Not all goals are best met by simply saying, “Give everything to my children.”

This principle is best illustrated by a story we have touched on frequently, the legal battle over the inheritance of Whitney Houston’s daughter. Ms. Houston’s daughter inherited the entirelty of her mother’s roughly $20 million estate. However, the young woman’s grandmother and aunt, the executors of the estate, have serious concerns about the daughter’s ability to handle that inheritance at such a young age. The executors basic argument is that Houston’s wishes were to provide long-term stability to her daughter (now 19 years old), and those wishes are not kept by the current disbursement schedule. The legal case is on-going, and it remains unclear how much the daughter will challenge the request.

While this sort of situation might seem unique to celebrities and those with unique family situations, the underlying principle exists for many local families. There is such a thing as receiving too much too soon. It is reasonable for parents to have reservations about their children’s ability to have an inheritance in a safe, responsible manner. Fortunately, tools exist to take those concerns into account. One need only be clear and comprehensive in estate planning matters to provide an extra layer of protection to guard against an inhertiance damaging one’s motivation and self reliance.

Some of those issues were touched upon in a CNBC story late last week. A financial advisor shared a common refrain noting that “ideally one would set aside enough funds to allow our family members to do anything they could do, but not so much that they could do nothing.”
How do you do that?

A discretionary trust is the best general tool. The trust holds assets and allows the one who creates it to set various guidelines for how those funds will be given to the beneficiary. Those guidelines mght include protections against third-parties receiving the money (perhaps in divorce) or delineate the specific things on which the funds can be spent (i.e. a home). However, it is critical to keep these documents properly updated–otherwise, they still may not work as desired when the time comes.

See Our Related Blog Posts:

Too Much Inheritance Too Soon

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