Trust your heirs?

Do you trust your heirs?

A major concern for many people is how their would be heirs would manage (or waste) property given to them. The issue comes down to trust, and it’s common for many people regardless of how large their estate is or is expected to be. Typically, the legal solution is to create a Trust. But a smart alternative, not often considered, is allowing the heir (or heirs) apparent to manage a small portion of their legacy, and by doing so, get a better idea of the likely result. Brian Luster and Steven Abernathy recently published an excellent post for Forbes on this topic, and it deserves some highlights for your consideration.

The Set-up

Give your heir a sum of money and then allow him or her to decide what to do with it. If you have more than one heir, give the sum to the whole group and require them to decide how to divide the money and then, after dividing it, decide individually what to do with it. Require being kept informed (i.e. what is done with the money) and refuse any requests for involvement. Then observe for the coming month (or more) and follow-up.

Issues to watch for:

  • What is done with the money? Is it wasted on consumer goods? Is it invested? Is it used in a financially responsible manner? Does it further your legacy or help charities you believe to be redeeming? 
In addition, watch for these issues if more than one heir:
  • Who emerges as a nature leader? Is there disagreement about who should be in charge (and how is it handled)?
  • Does the group defer to anyone in particular (whether a leader or not)?
  • Who is a problem-solver? Who is pro-active?
  • What is done with the money (i.e. what does each person do)?

Take Away

Use of this strategy will likely provide great insight. It may provide evidence of reliability and responsibility. It may also expose mistrust, poor leadership traits, poor money management skills, and frivolous tendencies.

Every family is different and so are its members. Thinking of your family as a legacy, and testing ways to further your piece of that legacy, will go along way to the execution of a successful estate plan.

Do you have a question about developing your estate plan? Contact the Law Office of William Harris, P.C. below:

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