I heard a story from another lawyer today, although it is sadly quite common. A grandfather, trying to do something for his grandkids as his dying wish, left those grandkids a bunch of money. His grandkids are still young – teens and preteens. He probably figured he would help them get a leg up by leaving them each about $1 million. So how is that a mistake?
The problem is that he left those gifts to the kids directly, rather than using a trust. Why does that matter? Because when the kids turn 18, they will have 100% access to that money. How many 18-year-olds do you know that are capable of doing something smart if handed a check for $1 million? Any? Hopefully, those kids get some great education from their parents about the need for sound fiscal responsibility, hard work, etc. Hopefully, one of them might do something smart – save for retirement, buy a house, go to college. Sadly, though, probably none of them will.
Call me a skeptic, but we know that many adults in the same situation would squander the money – how do we expect 18-year-olds to do better? Just google “sudden wealth syndrome” or what I call “lottery winners syndrome” and you’ll see what I mean. Hopefully, the worst that happens to these kids is they squander the money and reach age 20 or 22 with a valuable (though expensive) lesson learned. Hopefully none of them get taken advantage of, or do something self-destructive, or reach 20 or 22 addicted to booze or spending.
How did this happen? Where did the grandfather go wrong? The grandfather had to have written a will to accomplish this plan. So, I’m guessing he either wrote it himself, or he did an online will through a company such as LegalZoom. But here’s something even worse – he might have gone to an attorney who let him set up this travesty of a plan. There are certainly attorneys who claim to focus on estate planning who would not help this grandfather avoid this problem.
So the moral of this story – hire a great estate planner. Make sure that person educates you thoroughly on estate planning. In this case, the grandfather could have protected that money. He could have left it for the benefit of the grandkids but not directly under their control. Doing so would assure that the money would be professionally managed and put to great uses. His failure to do so, whether through ignorance or a desire to save a few bucks, will undoubtedly leave a legacy of pain and regret.
Remember that the fact that it was a grandfather leaving $1 million each does not matter. Parents get life insurance, die, and leave that money to their little kids. Doing so practical guarantees trouble to come. And people leave smaller amounts of money to their family with the same outcome. Do you know many 18-year-olds who should manage $500,000? How about $100,000? Or even $10,000? So grandparents and parents, even those of modest means, should make sure they have a great estate plan in place now!
If you have questions or concerns about your estate plan or the legacy you will leave behind, call Learned Lawyer today. I promise we will give you a great education on estate planning (for free!) and, if you decided to hire us, we’ll make sure your estate plan meets your goals and leaves a legacy you can be proud of. And it may cost less than you think. Call today, or click the “make an appointment” link at the top of our home page.
