You can leave your kids money without it becoming a handout. Structured correctly, your wealth can help your kids lead productive lives, without taking away their incentive for doing so.
New York, NY (PRWEB) July 20, 2004 -- Warren Buffet once said, "I want to give my kids enough so that they could feel that they could do anything, but not so much that they could do nothing." Your goal is to pass your money along to your kids without it being a permission slip to pass on making something of themselves.
For some perspective, we asked members of the Armchair Millionaire community for their thoughts on leaving money to their children. Here's a bit of what we heard:
"I plan on leaving income-producing assets (real estate, businesses, trusts, etc.) to my children. Hopefully these assets will generate enough money so they can pursue whatever life they want. They can start a business, teach, dance, farm, make movies, do nothing, whatever. My challenge is to raise them to appreciate their situation." --Stewey
"It's the responsibility of the parent to facilitate the ability of their children to 'have it better' than they did. This can and should include an inheritance, if possible. It's keeping the wealth in the family. Hopefully, the child was raised with enough financial savvy to grow that passed-down wealth for future generations." --Jill
Fortunately, there are things you can do to pass your money on to your children that still requires them to take responsibility for making their own way in life. My guide provides some of the best.
The Armchair Millionaire's Guide to Passing On an Inheritance
Create a gifting program. Start giving your money to your kids while you're still alive. The IRS allows you to make tax-free gifts up to $11,000 per person per year--a nice amount, but not enough to live on.
Establish a trust--with conditions. A trust is a legal entity that holds and manages assets for the benefit of a specific person or people. You can have the trust administered so that your kids don't receive your money until a specified age, or that they receive only specific amounts at certain intervals. Trusts are complex, so see an estate planning attorney for assistance.
Skip a generation. You can help out your kids by helping their kids pay for their college educations. State-sponsored 529 savings plans and Coverdell Education Savings Accounts both allow you to set aside money for your grandkids' college costs while providing you with a tax break.
Set up a charitable foundation. By creating a family foundation (and involving your children in it), you can prepare your kids for their inheritance, teach them benevolence, make a difference in the world and receive some nice tax advantages--all in one neat package. See an attorney or CPA who specializes in family-controlled charitable entities to set one up.
THE BOTTOM LINE: An estate bequest doesn't need to be a handout. Structured correctly, your wealth can help your kids lead productive lives, without taking away their incentive for doing so.
THE ARMCHAIR MILLIONAIRE WEEKLY SURVEY: How should you prepare financially for the birth of a child? Log on to www.armchairmillionaire.com and let us know.
Lewis Schiff is a contributor to CNNfnMoney.com, the Web sites for CNN and Money Magazine. His newest report, "How to Know When You Are Rich," is now available at www.armchairmillionaire.com.
CONTACT INFORMATION:
Lewis Schiff
Armchair Millionaire
877-833-2823
http://www.armchairmillionaire.com
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