Should We Leave Money To Our Kids?

The subject of kids and money is an emotional one for many people.  Most of us would do anything for our kids, and often times that means doing things like sacrificing our own financial well-being to secure an education for our children.  Others continue to help their adult children, financially, for many years into adulthood rather than contributing to their own retirement.

Helping children while we’re still here is one thing, but what about after we are gone?  If we have managed to build wealth throughout our lifetimes, should we pass that wealth along to our children, or is to do so to discourage them from becoming self-starters?  There is no right or wrong answer here, as much of it has to do with personal situations such as how you were raised, and how you came into wealth.

I do like Warren Buffet’s quote from a couple years ago, repeated in the USA Today article, Should kids be left fortunes, or be left out?  Buffet said about leaving money to kids, “wealthy parents should leave their children with enough money to do anything they want but not so much that they are doomed to do nothing at all.”

We’ve seen plenty examples of “doomed” kids, financially. Paris Hilton comes to mind, although she has managed to market herself as she got older to generate some of her own wealth, rather than relying solely on family fortune.  Of course, it could also be said that the last name Hilton has contributed to her success.

While I doubt I’ll ever have a fortune near that of the Hiltons, I do hope to have something to pass along to future generations.  And why not?  The money my wife and I leave our kids and grandkids could be a downpayment on a new home, or provide the seed capital for them to start a new business.  It likely won’t be enough to retire on, but I would like to think it would be enough for them to chase some dreams.

Often times we think of inheritances as opportunities for our kids to buy new sportscars, or a Harley, or a lavish vacation home.  The truth is that if we have managed to raise kids with many of our same frugal values, they will more than likely put that money to good use.  Imagine leaving enough to pay for a grandchild’s education, or the down payment on a starter home?  Imagine leaving enough for your kids to pay off their mortgage and experience debt freedom for the first time in their lives.  These are the types of things that motivate me to build enough wealth to leave behind, not just to my family, but to people and causes that I care about and want to leave a very small legacy.

What say you?  Should parents leave money to their kids?

Comments

  1. I agree with Buffett’s sentiment, but his situation is unique. I think in most cases leaving money for future generations is the most fulfilling way to use the money. If you’re torn, you could specify the use of the money, leaving it all in an education fund for your grandchildren to be used in equal amounts, but if they choose not to use it for tuition it gets passed to the next generation. This is one way your money can be put to good use. Of course it penalizes (in a way) the students that get scholarships – maybe they could get the value of their tuition as well. Just my two cents.

  2. I’ve seen it go in both directions with other people. Some will be responsible, pay off their loans, fund their children’s educations, and keep the rest for a rainy day.

    But in most cases I’ve personally experienced, money left on the table creates family tension and “wars” even before death, as siblings or children try to secure their portion of the fortune. It’s not pretty.

    Personally, if I have the opportunity to do something like fund a grandchild’s education, I will take it – but will make sure it’s specifically set aside for those purposes.

    The rest would be used for charity.

  3. I’ve never expected to get an inheritance from my parents and have planned accordingly. But I will probably have a little money to leave my children and I think about this question quite a bit.

    It is so unpleasant to see people monitoring their retired parents’ spending habits and grousing that the parents are spending their inheritance. I would hate it if my children ended up like that. And as Wojciech noted, money will easily break up families.

    I also think it is immature for adults to be planning their spending on their inheritance expectations (like buying more house than they can afford or expecting to pay for their children’s education). I think you should make your own money and if you do inherit something, well that is just gravy.

    I think it’s a greater gift to your children to spend more now when they’re young to give them the skills to support themselves for life.

  4. Not having kids (and not planning to), I can’t say for sure how my thoughts would change if I were a parent.

    But personally, I’m a big fan of the “Die Broke” idea–giving as much money away as possible while you’re still alive so you can see your children (or the charity of your choice) enjoy the use of it.

  5. I hope I don’t inherit a dime!! Because if I do inherit it means I lost a parent too early. God bless our parents and I hope I can provide for them the way they have for us.

  6. If possible, I’d like to leave my kids something. But my wife and I know the character of our kids and don’t have any reservations about it.

    I think that most parents know who their kids are long before they have to decide such matters and “knowing” the kids makes the decision easier.

  7. My wife and I have changed the way we think about this.

    Proverbs 13:22
    A good man leaves an inheritance for his children’s children

  8. If I am able to, I would like to leave money to my kids. I would even more like to be able to offer them the reins to a family business so that they would have a choice as to whether to sign up for corporate employment or not.

    Rob

  9. My mom gave me the money to pay off my mortgage and a significant amount to go towards my son’s college education. She wanted me to have access to the money when I could really use it. I am so thankful for her generosity. Money is always useful, but when you have the most expenses in your life is when the money is especially appreciated. Thank you mom.

  10. I don’t think I can top Buffet’s quote. That about says it. Leaving a legacy for your children is one thing, but leaving them too much will only atrophy their intentions.

  11. I hope my parents enjoy what they have and use it throughout their long and prosperous lives. If they chose to leave their worldly goods to charity it wouldn’t bother me much since I know how to get by on what I earn. It would bum me out more to lose my parents because they’re outstanding people in so many ways. They’re not usually financially sensible, but they’ve been fortunate in life and are therefore quite affluent. They’re the kind of people who like to use what they have to help others.

    My kid brother, who was raised differently from me and who never had to learn to budget, is hoping they kick off early and leave him everything. Of course he’d spend through all of it in a couple of years (he always does when he gets a windfall).

  12. I only hope to live my life debt free, and die debt free so the kids don’t have to take on my old age burden. That is my gift to them. And I hope to have enough to take care of myself til I die at age 103. If there is money left over after that, then it’s all theirs. But it is my responsibility to first have enough to cover my needs in old age.

    In the meantime, I help them out as needed – mostly in the form of no interest loans for house, college, business, etc.

    My kids, knowing Mom’s frugalness and early semi retirement, are not expecting anything when I go except a clean slate and my being debt free. They are not counting on any future inheiritance – and that is the way it should be.

    As for the grandkids, all 8, I set up for each of them a college/whatever account, to be distributed on a timely basis to them.

  13. I have a friend who grew up wealthy, she got a paid for Master’s degree from an ivy league school in psychology. She chooses to work in the poorest parts of Philadelphia for child services. She barely clears 35K. I think that is what Buffet meant by “let the do anything”, would she have chosen this work with out the financial strength of her family backing her up?

  14. I’m curious to know what people think about being an aunt. I never had children, and while my brother and sister both did and we’re a loving family, and remember birthdays and had no spats when our parents passed away, they’re kind of independent people who don’t offer each other money, focusing on their nuclear families. I retired and live on little but I’ve saved in IRAs for later on, and when it comes to naming beneficiaries and writing a will, now that my mom is gone, I’m wrestling with wanting what I have to go to my favorite charity or if my brother and sister will feel very hurt – and for that reason, I haven’t talked to them, nor made a will. They’re not my grandchildren, which would be different, and their parents are still working and helping my nieces and nephews financially.What do Frugal Dad readers think about this situation?

  15. That is probably a difficult discussion to have and a difficult decision to make. But I think the majority of people would like to see their money go towards their families. Like you mention, it can be used for future financial education, a home, emergencies etc.

  16. To Ellen: Don’t leave your money to charity too soon. You may need it to hire someone to care for you as you get older and not able to care for yourself.
    Do you have Long Term Care insurance? Medicare will only pay so much -Mine will pay for a family member to care for me in my home and did.
    Do you have a secondary health insurance to go w/ Medicare?
    Do you have your funeral arrangements made and paid for?
    Do you have medicare D Plan for your medicine?
    Don’t donate your money too soon and take care of your self first! Since you have no immediate family to help out.

  17. Hi Ellen,

    You’re in a great position. Inheriting money from a grandparent or parent has overtones of social entitlement. There are thousands of years of legal, social, and religious rules backing that concept up. But unless you’re Navajo, there are no rules as to how to leave assets to nieces or nephews. So there are no expectations. This means you can make up whatever you want and have your wishes accepted gratefully.

    When my dad’s aunt died, she had no children so she left everything to single person: one of her great-nieces. It was a surprise to everyone because the two weren’t particularly close. But nobody was offended, there was no fighting, and nobody put any pressure on the woman who received a surprise inheritance. Yet it’s very different from settling a parent’s estate, because only a couple years before, when my dad’s father died, they same people who had no problem with the way my aunt disposed of her assets bickered endlessly over what my grandfather left, and one of my uncles basically stole everything.

  18. I married an only child with the potential to inherit a sizable estate. I can’t tell you the discussions that went on over my joining the family as wife #2 & how the “inheritence” needed to be protected. There were requests for pre-nups, many visits to lawyers & estate planners. There were many discussions about “how” to move the money around so inheritance taxes would not have to be paid, blah, blah, blah…… All along I stood my ground, saying “I don’t want your inheritance.” Fast forward to the last few years. All the kids have spent their income/personal money on toys & fast times, all have high mortgages & even higher debt. So, grandma is now having palpitations over the potential for her hard earned money going down the drain via her grandchildren.

    And guess what? That multi millon dollar estate…..well it was ALL in stock!! As sad as it is for everyone who has lost so much due to the present state of the economy. All the estate is now is PAPER….there is very little if anything left. The initial hand wringing has placed a permanant wedge in the family & now there is nothing to show for it….

    I think if parents can leave property or funds to their children, that’s great. It’s even better if the children can be helped via paying for education or homes or needs when families are just starting out & really need the help.
    But to spend one’s life, obsessed with money & where it is going & how it may be spent & by who…well, that is very shallow living….

  19. Neither of my parents has a fortune of any size, but both of my grandparents have build up some wealth. I like my paternal grandparents philosophy, they wanted to enjoy the money with my father and I.

  20. Fascinating, my post today looks at the same thing from the other side: how should we honorably use any inheritance money that might befall us?

    I’m no materialist; I’d never spend inheritance money on a car or any depreciable asset. To properly honor that financial gift I’d have to save and conservatively invest it, I think. It’s a tough question. But I do think you can leave money to your children if you sit down with them beforehand and discuss what you would prefer they do with it.

  21. I’ve seen it both ways. Personally, I think it would be good to let your kids make their own way in their life. You may be robbing them of the satisfaction of making it on their own, just like you did. Desperation forces ingenuity and progress, and you should trust that they will do well enough on their own.

    A downpayment on a home is meaningless if they can’t afford to keep making payments due to an irresponsible lifestyle. Take your money, give a little to the kids, and enjoy it for yourself. You’ve earned it I’m sure.

  22. My parents have told me that they want me to be the executor of the estate because they don’t trust my other siblings.

    I can only imagine how much drama it will cause.

    I think, as you mentioned, an inheritance can do great things. But we all have negative images of inheritances due to what we see on TV. I would love to be in the position one day to leave my future children or grandchildren something.

  23. My grandfather just died last month. He was an honesy hardworking man who never had any debt. He built his own home that he & my grandmother lived in until he died (my grandma still lives there.)

    They only had 1 child (my dad), not sure how as he was nothing like my grandfather. He had this entitlement attitude his whole life, constantly guilting his parents for money. He did not raise us and never paid any child support.
    The day of my grandfather’s funeral he was taking things from the house to sell.

    My grandfather made sure he and my grandmother were taken care of, yet I fear my dad will take all that away. It is so sad.

    I don’t expect a penny from anyone as an inheritance, and either should my dad.

    I do however think family should help each other, last year my brother had the oppurtunity to go on a trip, my mom and I helped him to be able to do so. We were happy to do so (my brother is very hard working, and has a job and a condo, and a huge heart.) This was not a loan, but a gift. I do not think family should lend as this causes many problems as well.

    Once I have taken care of my retirement needs, I would rather help my kids buy a home or such instead of leave money when they die. But I have a long way to go for any of that. (I am 29, my kids are young.)

  24. I think it would be a wonderful blessing to gift one’s children with a sum of money – I would love to do that with my sons, 22 and 30. If I had money I would give it to them NOW instead of later. As it stands, all I can give them is love and good advice and the occasional help with a phone bill.

  25. I think the rich should leave their children money, but put certain caveats on it like:
    - they have to finish school
    - they have to work a certain period of time
    Something like these so they at least can learn the concept of working towards a goal.

  26. For hubby and I we do hope to be able to leave a sum of money to our boys in the future after we have covered all the potential expenses which we may occur for ourselves.

  27. Life is hard. Anything you can do to make it easier for the people you love should be done.

    All this talk about the possibility of too much money making kids lazy and aimless completely discounts that there is also the possibility the kids will use this money for something fulfilling and great.

    Anything is possible. The cat is both dead and alive until you open the box. And since you’re dead, you never get to open the box anyway.

    Just in case it’s alive, you should probably leave it as much money as you can.

  28. Sometimes you sound absolutely regressive, FD.

    Money is a burden. It took me half a lifetime to realize that, and I didn’t even have a head start on it, like you propose giving yours. They’ll have a lot of lessons to learn, about money, and you don’t make it any easier on them with a head start. Believe me.

    • So true…help them get educated first…the money later. Most of the monetary help gets squandered that I’ve noticed. Even a neighbor gave his daughter his home and he ended up being kicked out of his own home. It seems they couldn’t get along. Ugg!

  29. Interesting takes on both sides…there are just so many variables – age, family background, values, does generosity permeate the family legacy or the take it all mentality. :)

    Not a yes or no answer, but thanks for having us ponder it.

  30. I already know I will not have much to leave. But I am an accomplished artist, with local name value. I do my major paintings with the idea, now, that this is my legacy. My own walls are covered with the art of my great grandfather- a portrait artist from Norway. Money disappears, art is forever. But…it can always be sold in dire circumstances.

    My main financial goal is to help my kids as much as possible in college, then focus on never being a burden to them.

  31. Buffett was kind of an extremist when it came to his kids. His daughter was pregnant and living in a miserable little apartment and he was one of the richest men in the world at one point.

    But it’s interesting to see his quote since he thinks the should be raised to the point that it should discourage dynastic wealth.

    I don’t think I’d be able to do what he’s going to do and just give away all the money he’s made…

  32. I think it’s great to be able to leave something for your loved ones, but not at the expense of living your own life. Parents should enjoy the fruits of their labors. I tell my Mom all the time to die broke and full of wonderful memories. I want her and my Dad to travel and see the world and do everything they want to do…not worry about leaving me anything.

    But, if there is stacks of money to be left, I agree strongly with Warren Buffet’s take on it. Nothing feels better than accomplishing something on your own. If everything is just given to you, what do you have to work or live for? I wouldn’t do that to my kids. They deserve better than that. They deserve to find their own way and to feel the elation and pride one feels from standing on your own two feet and making it.

    • I love this MB. Our three daughters are educated..still working on getting our son to finish. That last paragraph is so true and inspiring.

  33. I believe Warren Buffet was actually quoting Andrew Carnegie!

    I’ll leave everything to my kids. I’ve been teaching and instilling values in them their whole lives. Why would I stop trusting them now?

  34. Thank you for responding. I’ve searched the web looking for someone who has my situation. I have two adult children and one grandchild. My son, Kurt, is 49, recently divorced with no childen. He is a nurse in the hospital where he was born. My daughter, Karen, is married and the mother of my granddaughter, Jordan. Jordan with be a senior at Baylor University next year.

    My biological father died a wealthy man and left nothing to me and my sister. Thus the reason for my desire to leave Kurt and Karen some money. I’m financially able to do so and my will states my desire. However, my concern is Kurt. He gambles to the extreme – horses, internet poker, etc, etc. He actually tells me about his activities!! He knows I despise this. He never had plans – short term or long term. He has only been focused on his nursing career for the last 15 years.

    Karen is just the opposite. Always the focused one. An attorney with her own lawfirm. Always the over achiever. Stable marriage. Leaving money to Karen is not a concern. But I can’t leave something to Karen and Jordan and nothing to Kurt. I just can’t. I see a lot of Kurt’s father in Kurt. That’s not a pretty picture. I have never said that to Kurt.

    I worked very hard for my money and the thought of it taking a trip to Las Vegas or some other “easy” place is very hard. I’m very upset about this. I’m tired of crying about this. No one I know has this situation. Surely, I’m not the only person who is trying to come to terms with this issue.

  35. @Ruth: My kids are still young, so I’m not able to fully relate to your situation. However, I can tell you that I have had discussions with a close family member in a similar situation. The thing that finally eased his mind was the realization that when it comes time for the money to be spent, he will be gone. How his kids choose to spend it is up to them.

    Like you, he has worked hard, and sacrificed much, to build a small nest egg. And the thought of it being frittered away in an instant drove him nuts. That is, until he came to the conclusion that when he left the money to his kids it was their money, and how they spent it was a reflection on them, not him.

    I would have the same concerns you do, Ruth, and I don’t blame you for being upset. You might want to seek counsel from an estate attorney who could help you draw up something for this particular situation. Perhaps your son could receive annual allotments over a period of time from a trust that is established at the time of your death, rather than a lump sum, which he may be more likely to blow all at once.

    Keep an eye on this post for other suggestions from readers. Hopefully someone will come along with a similar situation and have some sound advice for you. Thanks for sharing your situation with us, Ruth.

    • This is great. We have a Living Trust and feel as Ruth does. Our children are all so different and life happens. One marries wealthy and is lazy, another works hard but is divorced and owes legal fees, another works hard and plays hard, while another has the kids and a rude husband. It all varies and changes with time. I like the allotment idea. I hate the thought of trying to manage your money from the grave. That’s icky….however our daughter with the kids wants our house. But wait we have four children she’s not the only one.
      Everything we have is to be sold and split four ways. If she chooses to buy the house from the other 3 that’s her thing but the way things are going at the present time I don’t think they want her to have it.
      I can relate to Ruth though…my son would be in Vegas too!

  36. I am retired with a wonderful second wife. In my pre-nup,six years ago, I stated that I wanted one half of all I had to go the my middle- aged children and the other half go to my wife.

    However, I spend considerable time thinking I should not purchase this item or take this expensive trip(s) less I have very little left at my death for my adult children. And it keeps us from doing some enjoyable things that we would like to do.

    Neither of my children have ever said the words, but they have intimated that they hope that I do not simply leave everything to my second wife.

    Like Ruth, one of my children is financially well off and the other is always in need of financial help.

    I would like to leave some money to them at my death; but I am no longer comfortable spelling out a percentage or dollar amount to be left for them. Especially since I plan to live many more healthy years. Plus, the 2007-08 market eliminated a considerable amount of what I had hoped to pass on some day.

    • Dearest Rob, my goodness enjoy your wealth/life and your 2nd wife. Even if it makes your children angry, what you’ve earned is yours to enjoy. My husband and I have traveled the world and will continue to do so. Your children are who they are as ours are and even though they don’t like our travels, they get what’s left over when we’re finished. We have insurance and assets they can divide. And they can earn their fortunes.
      Please you are doing the right thing by splitting it all but you deserve to enjoy living your life fully and in happiness not worrying about your children. If they live in the US they’ll be fine! Please do what you like to do! OMG!

    • Yes. This has been great fun reading these situations. Maybe I should start my own blog.
      I just look back in my life at my father and grandfather and how hard they worked and lived through WWII, a depression and diseases we’ve conquered…and how things are now…the expectations some have. This has been fun food for thought for sure. Thanks FD!

  37. Here is what I would do…

    Lets say that my wife and I are both gone and we have 3 million total to pass on to my 3 kids. After an initital 100K set aside for a house payment and/or college expenses…the remainder would be placed in 3 separate trusts…1 for each of my kids. The child would be the sole beneficiary of the trust.

    To get money from the trust you must work. Whatever you make at your job…that is the amount that will be distributed to you. When the trust money is gone….its gone. If you die with money still in the trust….the new beneficiaries will be your offspring or other family members….same rules apply.

    Of course….details would be worked in regarding disabilities….and retirement. But….that is the jist of it. Work hard and get rewarded….no risk that the children will lose incentive. Goodbye and Good luck.

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