Should you inherit your children now or let them wait! My firm opinion is there is no good answer to this question. I lean towards waiting if you can, and if it makes sense. The last few years of waiting can improve the financial position of an estate 40% or more because you finally have the leverage with large amounts of cash to make large improvements in the level of investment.
The attorneys can give you all of the legalese about how to protect your estate and how to have a will written that observes the last comma of your desires. This article is not about that sort of advice. This article is about how to deal with family as you near the point in your life when inheritance will become an issue.
You have a child (no matter what age) who is not able to manage money under any circumstances. To prove this point, they have left a string of failures behind to prove their inability to judge. When they worked for wages, they were broke within hours of receiving a paycheck. When someone (certainly not you) backed them in a simple business they blew it big and bankrupted. This has left a certain amount of strain between you and them, but fortunately you have hung in there and not donated to this spender.
On the other hand, you have a child who could be let loose in the Sahara and 30 days later would be selling ice cream franchises. This child is a different case to be judged. If you gave this child 10 Cents, the other child would know in 10 minutes, and that would cause additional pain all around. What to do?
Additionally, there are others in the family who have long histories of assisting when asked and have needs you could help, if you loaned them money. However, if you loaned them money and the children ever learned, there would be trouble, so no money has been loaned.
I believe that a firm, sit-down-with the person involved and having a frank discussion as the best way to insure that your instructions are followed. Folks attending the reading of the will, will know where they stand and what is coming to them. Folks who wanted a loan or gift can be assured the funds will be there for them after your death, and not to worry about the money prior to your death. If they have some alternatives they wish to discuss, that meeting would be a good time to get everything out on the table.
For those situations where you have decided you want to fund a certain situation, there are ways to get the job done without making a direct loan. Lets list a few:
1.Go to a discreet friend and either give them the money to loan or, if circumstance permit, have them make the loan and you gaurantee the loan repayment. Variations on this theme have worked for years. Why? Because there is a very small number of people who know the loan is a product of your money. All papers on the loan have other peoples names on them, not yours.
2. If a specific item, like a boat, is desired, go to the vendor of this item and gaurantee the loan that purchases the item. Suggest the child go into the store and ask if they will give them the item. When the loan is made, it is in the stores name, not yours and you
are not mentioned in the loan papers. Your note is with the store keeper!
3. Under some circumstances you usually can go to a a school, or similar non-profit and make a gift of $XXX bucks with the agreement the child will come to them for a loan and they will make the loan from the funds you donated. The loan is from the non-profit to the child. Your foundation or other entity will have a paper trail leading from you to the non-profit.
Variations on the above theme will get the job done. Nobody needs to know exactly how you did it, but many will suspect you “arranged” for a loan, but they will not discover how it was done unless you tell them. The shopkeepers and others you may involve will keep things confidential for fear of losing this sort of business in the future.
Should you give your irresponsible child large sums of money? No! Should you arouse the rest of the family by making loans to selected individuals? No – Use intermediaries and keep peace in the family. Additionally, the intermediary method keeps your liability to an absolute minimum.