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Tips for giving children a significant inheritance

It's often stated that many children who get serious inheritance money--in the millions--end up wasting it, so vast fortunes often don't get down to the third or fourth generation. If you're worried about that happening to your money, there are a few tips that may help.

-- Give out small amounts first. You may be planning on leaving your child $10 million, but you can give him or her $20,000 long before you pass away. Use this smaller amount as a test to see how it is spent, and it will tell you what the child will do with the $10 million.

-- Use a trust that matches earnings. Some parents worry that children won't have any incentive to work if they have free inheritance money coming in. One way to combat this is with a trust that just matches whatever the child makes in a year. If the child doesn't work at all, he or she gets nothing. If the child works hard and makes $100,000 per year, that money is then doubled.

-- Distribute money based on age. You might be worried that a young child--like an 18-year-old--won't use money wisely, so you don't want to give him or her the full amount immediately. You can set up a trust that pays out money at different ages. It could give out $1 million at 18, $2 million at 25 and the full $7 million remaining at 30, for example.

-- Give things that aren't cash. This way, money can't be wasted--at least, not as easily. Use the money to buy a home for the child or to pay off student loans.

To do any of the above, make sure you know what legal steps to take in Florida.

Source: Forbes, "5 Tips Before You Leave Your Kids an Inheritance," Robert Pagliarini, accessed Dec. 22, 2015

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