Some parents choose not to leave a large inheritance to their children.
Parents support their children in a variety of ways.
While they are minors, parents are responsible for taking care of basic needs, teaching values, and providing protection.
As children enter adulthood, parents help their children launch into independent living.
Life circumstances can influence the support parents may provide their adult children.
Various factors like personal values, tax implications, or financial responsibility can influence parents to structure or limit inheritances to their adult children.
An outright inheritance could quickly be spent on a luxury boat rather than providing support for generations.
Family values and financial goals should be foundational to estate planning strategies.
Parents may choose to set limitations on an inheritance to their children due to personal circumstances, financial maturity, and the impact of wealth transfers.
How might specific goals and values impact the decision to reduce or provide greater guardrails around an inheritance?
When children inherit a large sum after their parents die, they have a greater chance of misspending.
Various studies and surveys indicate beneficiaries commonly burn through large inheritances.
Common causes include lack of financial literacy, poor financial planning, and overspending.
To protect their hard-earned wealth from being squandered, parents may choose to structure their estate planning to encourage responsible money management.
Some children pose more significant risks to inheritance through substance use, gambling issues, and immaturity.
At other times, external factors and situations can threaten an inheritance, such as predatory influences or spouses who pursue a divorce.
As an alternative to an outright distribution of the inheritance, parents can create trusts to help protect an inheritance for and from their children.
Fair does not always mean equal.
Some children will simply require more support than others due to individual circumstances.
One child may have a successful career and be self-sufficient, while another child may have disabilities requiring greater cost and care.
A child with special needs (mental or physical, or both) may require additional support well into adulthood.
Parents may use a special needs trust to provide for their child while safeguarding public assistance eligibility.
Although the federal estate tax exemption is $13.99 million in 2025, some states have their own estate taxes.
Because these states may have lower exemptions, one could avoid a federal estate tax but trigger a state tax.
When a state has an inheritance tax, leaving a sizeable outright sum may reduce the amount left to your adult children.
Yikes!
Strategic estate planning with an experienced attorney in your state of residence can help minimize these tax burdens.
If parents choose to structure or limit the inheritance for their children, they have several tools and strategies at their disposal.
What are these?
Parents can retain greater control over the when and how of asset distribution with a trust alternative to outright distributions.
How are these commonly used?
Parents can structure the trust to release funds in installments, such as every ten years at ages 25, 35, and 45.
Another method is to direct distributions at certain milestones like college graduation, purchasing a home, or starting a business.
Lastly, parents can allow a trustee to make discretionary distributions based on beneficiary needs and demonstrated financial responsibility.
Incentive trusts are used to tie specific achievements to the distribution of funds.
Inheritances could be used to match earned income to promote career development.
Funds could be distributed to pay for higher education.
Payments could be made from the trust to provide business capital with oversight structures to prevent mismanagement.
Incentive trusts can encourage positive behaviors while discouraging financial dependency.
Family Limited Partnerships (FLPs) allow parents to retain control of assets with the gradual transfer of ownership to heirs.
This tool shields assets from creditors, minimizes estate taxes, and teaches financial responsibility with gradual wealth management.
Charitable Trusts or private family foundations provide philanthropy-motivated families with opportunities for children to participate in gifting while limiting personal access to funds.
Charitable Remainder Trusts promote charitable engagement while providing some ongoing income.
Estate planning is a highly personal endeavor and an enduring expression of values.
An experienced estate planning attorney can help promote responsibility, preserve wealth, and leave a meaningful legacy for generations through carefully structuring an inheritance.
If you want to explore your estate planning options, request a consultation with our Overland Park estate planning law firm.
You can promote financial responsibility and independence while supporting your heirs with a structured inheritance.
Because you cannot predict whether heirs will face divorce, lawsuits, bankruptcies, or predatory influences, you can proactively protect against these dangers.
With strategic planning, you can minimize estate taxes and promote generosity through philanthropy.
Structured estate planning can help you customize gifting according to the specific needs of your children.
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
References: The Hamilton Spectator (Jan. 18, 2025) “Are Your Kids Banking on an Inheritance?” and Wealth Management (July 22, 2024) “Celebrity Estates: Simon Cowell and Disinheritance in Estate Planning”
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