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Should I Leave Money to My Kids?

Life insurance is often purchased to leave a legacy to the next generation.

People buy life insurance in order to…

  • Take care of their family obligations
  • Make sure income is replaced
  • Secure their business interests
  • Provide money to pay taxes
  • And leave something extra for their kids

(Of course, that extra something can be big or small, depending on the net worth of the insured. If your father is not a billionaire, then don’t expect a million dollar inheritance…it would be nice though, wouldn’t it?)

But is this a good thing to do?

Misplaced love

Insurance people often talk about the purchase of life insurance being an act of love.

The insured does not personally benefit, but he or she loves his family enough to take care of them when he passes on.

Sometimes, though, love can be misplaced. We don’t want to spoil people, right?

Apparently, many Americans feel this way. More and more people want to spend all the money they have made.

A nickname for them has now emerged: “die brokers.”

Today, only a small minority of people are willing to constrain their lifestyle to maximize their inheritance.

Even those people who are planning a legacy are being cautious with their generosity. Prospective heirs are being educated in responsible money management. Tools such as trusts are being utilized to control access to the money.

As a matter of fact, compared to other countries, Americans are starting to lag behind in leaving inheritances for future generations. Only 56% of our retirees are planning to leave money to their children. The average inheritance is $177,000.

What is going on here? It used to be that immigrant families came to this country to make a better life. That included making sure their children will have more than they had. Is this no longer the American way?

Perhaps the problem is that adult children these days have been given so much, that to give them any more would spoil them further.

What do you think is going on?