Whether you accumulated your fortune through savvy business relationships, or you inherited sizeable assets (or both!), you naturally want to share this wealth with your children and possibly use it to help them in their own ventures. This sentiment is noble, and it reflects normal parental desires. You want to teach your children great values (industriousness, self-sufficiency, etc.); at the same time, you want your children to avoid needless struggle. So how can you use your wealth wisely to help them get where they want… and simultaneously protect yourself (and your assets) from potential bad decisions or “business experiments” gone awry?
First things first, you want to assess your children’s financial literacy and general business and money management skills. Do they know how to handle money responsibly? Will they spend frivolously on ill-planned business ventures or risk getting involved with dubious partners? How resourceful are they? Will they bounce back from setbacks, or will they expect you to be there for bailouts, no questions asked?
You need to know your children’s strengths and proclivities, because their actions could redound to affect you. What if you co-sign on a loan for your child, and he defaults on the loan, leaving you holding the bag? What if your daughter’s ambitious (but poorly conceived) philanthropy project leaves you on the hook legally, somehow? Could lawsuits or tax obligations generated by your children's mistakes cost you huge amounts of money (and time and stress), and also drive a wedge in your relationships? You bet it could.
Unless you’re very sure of your children's money management capabilities (and, frankly, even if you are), protect your assets and interests before giving money or co-signing anything. One excellent, ethical and financially savvy way to accomplish this is by creating an Ohio Legacy Trust. This asset protection instrument can keep “creditors and predators” from touching your assets… assuming you set it up properly. While it’s not exactly cheap and easy to set up such a trust, investing in this kind of solid planning tool can pay you back both in terms of bounding your risk and giving you peace of mind. You don’t want to have to sweat the legal and financial implications of giving money to your children. It’s okay to seed ridiculous or even totally unsound projects or dreams… just as long as doing so doesn’t leave YOU broke or frustrated or ensnared in legal drama.
Gudorf Law Group would love to learn more about your needs and discuss instruments like Ohio Legacy Trusts with you. Ted Gudorf is one of the only attorneys in Ohio who’s qualified to establish these trusts effectively; he works extensively with high net worth clients just like you. Please call the Gudorf Law Group at 1-877-483-6730 for a free consultation about your and your children’s future.