Aug 02, 2019

Our Insights

It’s common practice these days for older parents to provide financial aid to their grown children. This isn’t a surprise given today’s challenging economy. Having plenty saved up already, you may likewise want to support your children with a financial gift before you die. 

But could it be too soon to start distributing your children’s inheritance?

Here’s what you need to know.

Benefits of Early Inheritance

There are some definite pluses when it comes to distributing your wealth prior to your passing.

Satisfaction

You can do better than just die happy knowing that your family will have your money. You can leave this life happy that you saw your family make good use of the money you left them. It brings immense satisfaction to know exactly how you’ve helped your loved ones and to see them achieve success. This way, you can share in the joy of life together while you still have the time.

Peace of mind 

It will also make you feel better to know that the inheritance you’re leaving behind is being used as you intended. By distributing it early, you can be certain that your wealth is being used wisely. 

Fill a need

The economy today is different from what it was when you were young. Your grown children may now face genuine challenges in affording higher education or purchasing a home for their own growing families. By sharing the inheritance early, you can give the next generation a valuable advantage in life. 

Assist in the transition

Your beneficiaries may be apprehensive about inheriting your business, property, money or other assets and might not know how to take care of them. By passing on those benefits while you’re still alive, you can guide the transition process and provide advice where it’s needed so that your beneficiaries can carry on the family legacy with confidence.

Risks of Leaving Your Inheritance Early 

Eager though you may be to share your wealth with the next generation, you should be prepared for two serious risks of doing so.

First of all, there’s the risk of giving away too much. It’s easy to overdo it in your enthusiasm to help your family. But you must make sure that you leave yourself with sufficient funds to support your lifestyle throughout the rest of your retirement. Otherwise, the tables will turn and you could become financially-dependent on your children. 

Additionally, there’s the risk of financial abuse. You might be surprised by the number of relatives that come out of nowhere when they hear that you’re giving away money. Some family members may try to take advantage of your trust and influence you to part with your savings in a way that goes against your wishes.

How to Share Your Inheritance Early

You can still have the joy of helping your children financially before you pass on. Just make sure that you plan things out before you do. 

Give priority to allocating money for you to live on. Sit down, do the maths, create a realistic budget, and live by it. You can give generously from the funds that you genuinely do not depend on.

The next step is to determine the wisest way to start distributing your children’s inheritance. You don’t have to give it all away at one time. Talk with your beneficiaries to find out what their hopes and reservations are and communicate your wishes in return. You may be able to share a little bit now to help them with a specific problem and then leave them the rest in your will. 

Alternatively, you could consider helping your family financially in other ways such as by offering them a low-interest loan or letting them rent one of your properties at a reduced rate.

Get Advice

This is a challenge that you should not take on without the assistance of a trusted, experienced financial adviser. Arranging your financial affairs for the benefit of the next generation can be a confusing and emotional affair. The experienced advice of an unbiased third party such as a financial adviser can help you make logical decisions during this difficult process. An adviser can help you with an inheritance strategy that sets your family up, while ensuring your own needs are met. 

Get in touch with Calder Wealth Management now. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by Ben Calder, Private Client Adviser at Calder Wealth Management.