There is one possible downside to being a generous grandparent: Your children may view bequests to your grandchildren—particularly if the latter can spend the money before they finish college—as usurping their parental authority. What’s more, grandchildren receiving a hefty inheritance at an early age could wind up rudderless. Or as one financial adviser told us: “When your goal in life is to not screw up what you have, as opposed to seeing what you can build and create yourself, it doesn’t promote high self-esteem.”
In short, to keep your benevolence from backfiring, tell your children what their children could be getting as an inheritance, and ask how your children feel about it. One possible strategy is to pass money to a grandchild through a trust fund for which the child’s parent is one of the trustees. And again, it’s critically important to put some thought into the age at which your grandchildren would get control of the money. You may want to wait to hand over any funds at least until they are in their early 20s, or parse it out gradually, letting them use part of it to pay, say, college bills. I trust you have a good relationship with your grandchildren, as do many grandparents. But having Jack and Jill inherit a pile of money before their professional lives have even begun likely wouldn’t help anyone.