Working out the right way to leave money to your children can be challenging, especially if you have a substantial sum. People often misquote the Bible, saying that “money is the root of all evil,” whereas the actual phrase was “a love of money is the root of all evils.” Money is neither good nor bad — it is how you use it and how you think about it that can create problems.
Leaving money in a trust for your kids has earned a bad reputation due to the exploits and mishaps of so-called trust-fund kids. Yet, it does not have to be like that.
Leaving a lump sum of money could harm your children
Imagine that your parents died when you were 18 years old, leaving everything to you. How much of their estate would you still have today? Would you have invested it wisely, or would you have wasted it? Would you have pursued your studies and achieved the career status you have today? Or would you have got lazy?
Not everyone knows how to manage an inheritance, so setting up a trust can help recipients use the money wisely. Age is not the only issue that can see the money you worked hard to put aside go to waste. People can lose money in a divorce, in legal actions, due to addiction or when people scam them out of it.
You can use a trust to decide at what age the money is released. Or you could set it up to pay bit by bit over time. You could even set it so that payouts match what the person earns to encourage the beneficiary to work harder or smarter. Trusts are versatile tools. Finding out more can help you decide if you should include one in your estate plan.