Wealthy families frequently confront the same question: how to leave millions to your kid without ruining her life?
The intention of giving an inheritance to your kids or loved ones is to help their future, not to hinder them. Unfortunately a large inheritance can sometimes hurt more than help, depending on how the distribution is set up. This is a common issue with the wealthy and successful celebrities, as is the case with Whitney Houston’s Estate.
The inheritance left by Whitney Houston is chronicled by CNBC in an article titled “When $20 Million Is Too Much to Leave the Kids.” Without delving too much into the case, the passing of Whitney Houston has set her 19-year-old daughter, Bobbi Kristina Brown, up to receive a staggering $20 million. Recently, Houston’s mother and manager, both of whom serve as executors of the Houston estate, filed a petition to restrict payments on the basis that the inheritance was simply too large. According to the petition, such inheritance payments would make Bobbi too easy a target for predators, or worse, enable Bobbi to devolve into an unhealthy lifestyle. Taking the petition at face value, this consequence would not have been Houston's intention.
Regardless of intent, the article recommends an excellent alternative that Houston could have employed to protect the her youthful daughter who likely is ill equipped to handled the responsiblity such a huge amount of wealth brings. This alternative is called a “discretionary trust.” Using this type of trust would have allowed for instructions on how the funds were to be managed and released.
The article also provides some practical pointers, like teaching your children financial responsibility at an early age and reviewing (and revising) your estate plan from time to time.
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Reference: CNBC (October 19, 2012) “When $20 Million Is Too Much to Leave the Kids”