How can you keep your kids from blowing their inheritance?

Once your child reaches 18 years of age, they are legally considered to be an adult. As an adult they could inherit large sums of money, but that does not necessarily mean that they should.

If you do not have a will and something were to happen to you, by law, your child could inherit all of the money in your bank accounts, life insurance policy and other assets - and they will receive it all in one lump sum. When they inherit this money, they will have complete control over it and can spend it in any way they choose.

In many cases, parents do not feel it is a good idea for their 18-year-old child to have complete control over thousands of dollars. If you can remember when you were young, and some of the ways that you might have spent a large sum of money, you may understand why this might not be the best way for your child to receive their inheritance.

The truth is that many of us aren’t equipped to deal with receiving a large sum of money all at once. Think of all the stories you’ve seen and read about lottery winners standing in front of the camera with their oversized checks, talking about how they are going to quit their jobs, travel the world and buy homes for their family members – and they say they’ll save some of it too.

Their intentions may be good, but sadly, many of them end up going broke and filing for bankruptcy.  While your inheritance may not be equal to the Mega Millions, you still want to protect it so your kids don’t have the chance to blow right through it.

The decision of how to leave your child’s inheritance to them is a personal one and is often based on that child’s individual personality. You should think through this decision very carefully. Will he or she spend the money on their education and the things they need in life, or will they blow it on fancy cars and vacations to Mexico?

If you don’t feel that your child would be responsible enough to have control over large sums of money when you are still around, you likely wouldn’t want to hand it to them if something should happen to you while they are still young. Although you can leave instructions about how you would like the money spent, it is important to remember that they will still have control of that money and can spend it in any way that they choose.

Fortunately there is a way that you can have some control over the money that you leave your child. If you leave that money to them through a trust, the trustee can ensure that the money is spent in a responsible way, and your child will not have to worry about facing the temptation to blow their inheritance on things that will do them no good later in life.