Preparing Your Children for Inheritance

In August 2020, Forbes Magazine reported that the greatest wealth transfer in history will happen in the next three years.  Members of the Baby Boomer generation (oldest members turn 75 this year) have already begun to transfer their assets to the next generation.  The estimate of wealth transfer is between 30 and 70 trillion dollars.  The reality is that most of this wealth will not last beyond the second generation after the Boomers.  Our responsibility as parents is to teach our children how to prepare for the inheritance they will one day receive.


If you are leaving your assets to your children or grandchildren, it’s a good idea to have some parameters in place.  Most eighteen year-olds would not know what to do with $500,000.  In your estate planning documents, you can set age and percentage guardrails.  For example, if Nathan and I both died prematurely, our child would receive 33% of our assets at age 25, 33% at age 30, and 34% at age 35.  You can also set parameters in a trust, so that your trustee only makes distributions necessary for the health, education, maintenance, and support of your children.  Be sure to choose a trustee (if needed) who is trustworthy, financially savvy, and will act appropriately on behalf of the intended beneficiaries of the trust.

Financial Education:

Financial education could be the most important piece in assuring that your children use their inheritance wisely.  If you are comfortable sharing information with your children, give them some examples about what an inheritance might look like for them.  Consider paying for them to take a personal finance class that includes basic budgeting and investing instruction.  Encourage them to invest in their 401ks at work or open an IRA account.  Make an appointment for them to meet with your financial planner.

Give Them a Test:

Of course, this test should be age appropriate.  Give your child an agreed upon amount of money, depending on the circumstances, this might be $1,000 or $100,000.  See how they spend it.  Do they ask for advice?  Do they use it towards a goal?  Do they take it to the casino?  The way they spend it will give you a good idea of their spending behavior and how much work you have left to do.

Learning by Example:

Instead of gifting to your children, incentivize them.  If they pay an extra payment on their mortgage this year, match the payment.  Same idea with student loans.  Match a portion of their earnings with a contribution to a Roth IRA.  Show your children the history of your contributions to a 529 education savings plan, and explain how those contributions grew during their childhood.

~Jennifer Adams

Any opinions are those of Jennifer Adams and not necessarily those of RJFS or Raymond James. Expressions of opinions are as of this date and are subject to change without notice.