Post by Myra Salzer
I’ll continue my series of blogs covering the common mistakes surrounding transferring wealth with Mistake #7, Surprising Your Beneficiaries. If you have not already done so, I invite you to read Mistake #1, Mistake #2, Mistake #3, Mistake #4, Mistake #5, and Mistake #6.
Mistake #7 – Surprising Your Beneficiaries
Receiving money or becoming a trust-fund beneficiary is not like a surprise birthday party. A surprise birthday party comes and goes and that’s the end of it. Not so with a surprise monetary gift. It’s with you for life!
Whenever you endure a life-changing event, the more notice you’re given the more you can prepare, in turn the easier the change will be once it arrives.
Some surprises cannot be avoided. For example, an untimely, premature death that precipitates the creation of a trust fund cannot be planned. But most gifts can be. And the more a beneficiary knows what to expect, the better they can plan accordingly. I know of one heir who took responsibility for a lump sum he was given at age 19, buying a house and finishing college rather than investing in himself and his passion – which happened to be racecar driving. Had he known he was going to receive a much larger lump sum on his 35th birthday, he would have taken that first tranche and invested in himself and his passion. By the time he received the second, larger tranche, it was too late for him to be a professional driver. If only he had known!
Exactly when to tell your heirs what your plans are is a tricky question. On the one hand, you don’t want to deny them an opportunity to become self-sufficient. On the other hand, though, you don’t want them to miss an opportunity of a lifetime just because they were kept in the dark about what to expect from you.