A recent survey by the WealthCounsel indicates that 35 percent of all people drafting an estate plan are doing so with an eye toward preventing beneficiaries from mismanaging their inheritances. One way that estate planners often accomplish this goal is by staggering distributions.
A few generations ago it was common to simply give a child his or her inheritance in one lump sum when the beneficiary reached the age of 18 or 21. Over the years, the “magic” age has slowly been extended to 25 or older. In fact, many people are choosing to not give a beneficiary one lump sum at all. Instead, they are spacing out the gift over five, ten, even 20 years. The reasons for this are varied, but most relate to the fact that people are “growing up” slower than in years past.
For example, when your great-grandparents were young, it was far from unusual to be married with children by the time someone was 21. They were also likely finished with their education, starting in a career, and living away from their parents. Today, almost 30 percent of people between the ages of 25-34 are stilling living with their parents, and the average age for a first marriage is 27 and 29 for women and men respectively. Therefore, people are choosing to wait longer to hand over an inheritance.
If you are concerned about handing your children a large sum of money at relatively young age, talk to your estate planning attorney about how staggering an inheritance can work for you.
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