I think I have seen enough episodes of “I Blew It” to understand that when wealth is distributed prematurely to beneficiaries who have no financial literacy background, it’s a recipe for disaster!!! In my years as a practicing financial planner, I had the opportunity to witness this with my own eyes. I had a very young client, who inherited just a little over a million rand when his mother passed on. It took him less than a year, to blow it all. I was in disbelief every single time he would contact me to make a withdrawal from his investment, his bank statement was telling, all he was interested in was purchasing the latest pair of shoes, eating out and impressing friends.
I remember telling him that he should let this investment grow and maybe consider furthering his studies, but he was not interested. As heart-breaking as it was, I watched as he spend every single cent carelessly.
His situation is by no means unique, as most South African youth suffer from instant gratification, they want to enjoy themselves right here and now. This trend has escalated over the years as a result of social media usage being on the rise and people wanting to show off their best life, even though they are struggling to meet their financial obligations.
This got me thinking, when we got married a few years ago, we happily drafted a Will stating that the assets of our children should be held in a Trust until they reach 18 years of age. I found myself questioning this decision, would my kids have gained financial independence just because they suddenly turned 18?
We sat down a few months ago with our financial planner to review our Will and decided perhaps the best plan of action is to allow them to complete their tertiary studies first and then get their inheritance if something was to happen to us both. The cold and hard truth is that financial maturity does not necessarily come with age. So how do you protect your beneficiaries from themselves with the hope of building a lasting legacy?
Here are a few tips….
- A Will is not negotiable, this will ensure that the right beneficiaries inherit from your estate
- You can stipulate in the Will that assets must be held in a Trust until your minor children have reached a certain age, this would allow the trustees to make decisions on their behalf, thus protecting their inheritance
- And just in case you are worried that your inheritance might land up in the wrong hands, you can stipulate in the Will that the inheritance should not form part of any current or future marriages. This means that should your children find themselves in a marital dispute, no current or future spouses can have a claim against your estate.
The truth of the matter is, to build a lasting legacy, finances should form part of our everyday conversations. As guardians and parents, it is our responsibility to drive healthy discussions around the topic of money so our children can have a better understanding of their finances, even after we have passed on.
Created by Phina Nukeri, CFP®
Disclaimer: This does not constitute financial advice and for proper financial planning, please consult a Financial Professional.
To find a Financial Professional go to fpimymoney123.co.za