Skimping on your children in your will, or even leaving them out entirely, is fast becoming a trend, but you may want to consider the pros and cons before you do it, especially if you choose to leave one, but not the others, out.
According to figures released by HSBC in October, 23 per cent of retirees would rather spend all their savings than leave it to their kids.
Even some celebs are joining the trend, among them musician Elton John and celebrity chef Gordon Ramsey who’ve both said they most definitely will not be leaving their millions to their offspring.
And billionaires have long been thinking along these lines – famed investor Warren Buffett and Microsoft founder Bill Gates have made clear that their children will be given enough to be comfortable but no more.
The reasoning? They want their children to work hard for their money, just like they did.
Some Baby Boomers choose to spend their hard-earned money on travel once they’ve retired. In fact, 20 percent says they’ve spent their children’s inheritance in order to do so, according to a survey by the Australian Seniors Insurance Agency; with four out of five of the keen travellers saying they don’t feel guilty about it.
Others choose to gift their children early.
“We’ve got a strong belief that I’d rather help my children when they’re 30 and I’m 60 rather than when they’re 60 and I’m dead,” says Noel Whitaker, the well-known Australian finance expert, who says whether or not you leave your kids anything isn’t really a “yes” or “no” question.
Speaking exclusively to Starts at 60, Whitaker says most parents only want to help children if they think those children deserve it.
“If they’re hopeless and you help them, it only makes it worse,” he says.
“I don’t think parents should be focussed on helping their kids – most people don’t die broke and it’s increasingly common to marry again, which often makes a blended family and that can make for all sorts of problems. It’s a minefield.”
Whitaker says in an “ideal world” parents who teach their children about money shouldn’t need to worry about whether or not those children will be financial secure once they’re gone.
“If you’ve taught them that the way to be financially successful is to improve their income and the way to do that is to improve their skills,” he says.
“And if you teach them to invest their income wisely, that’s a guaranteed way to become wealthy. Because one of your kids might become a specialist in their field and the other might be happy as a bookkeeper so there may be different levels of financial help needed but I think you’ve got to work with your kids on that one.”
While there is no “forced heirship” laws in Australia, which means you can leave an heir out of your will, Whitaker says you’ll need a good lawyer to draft your will that sets out “very specifically” the reasons you’re leaving one, or all of your children out, as legal proceedings contesting a will can be costly.
However, he says there are ways to leave money outside of a will.
“If you and I have a house as joint tenants and I die, than that house goes to you – it’s unchallengeable,” he says.
“You also can’t challenge money that’s in an insurance bond and, binding nomination in superannuation is also fairly effective because the trustee of your super has the decision of who gets the money and you can make a nomination that’s binding on the trustee.”