Earlier this summer, Sting, the former front man of The Police announced his children will not be inheriting his fortune after his passing. The rock star joins a growing trend amongst some of the world's richest in encouraging their children to learn the value of hard work and saving, rather than being handed a trust fund. According to a survey of Canadian millionaires by RBC, results showed nearly one-half don't have confidence in their children's abilities to manage their inheritance, and the findings are similar around the world. So what to do when you inevitably leave this world? While there is no right or wrong answer, there are options that can offer an effective balance in leaving children with a layer of financial security, while also empowering them to become financially independent.
- Create a testamentary trust to pay out the inheritance in stages. For example, upon completion of goals such as post-secondary education or when they reach certain ages.
- Create a family bank, offering revolving loans and joint investment decisions.
- Start providing financial education at a young age and encourage positive budgeting, financial management and savings before they receive their full inheritance.
- Start their savings by gifting shares of local income property. These are less likely to be sold when compared to stocks.