Inheritance, Why Wait?

Inheritance, Why Wait?

Donald and Daisy (names changed to protect the innocent, and because it made me laugh) have been clients of mine for years, and somewhere along the way they became friends. Like most people in their stage of life, they had a plan for what would happen to their money when they were gone. Split it three ways, one share for each kid.

Then they asked themselves a question I wish more people would ask: why wait?

So they didn’t. They gave each of their three kids a sizeable gift, today, while they’re here to see it. Their oldest finally had the down payment for a first home. Their middle child tackled the house projects that had been sitting on the “someday” list for years. Their youngest put it toward their own kids’ college. Three gifts, three completely different lives made easier, and Donald and Daisy got a front-row seat to all of it.

When I asked how it felt, Daisy didn’t hesitate. She told me how good it felt, and that the joy and surprise in their kids’ eyes was worth a million dollars.

You can’t get that from a will.

The typical way we do it

Here’s how inheritance usually works. We retire and start spending down our hard-earned savings. Then we reach a stage where we lose the gusto to spend, and we sit on our funds watching them grow until, poof, we are gone. It gives us joy to know that at death we’ll help our loved ones and the causes we care about most.

Here is the only issue with all that: YOU ARE DEAD. Sorry to be so blunt, but that is the fact. What enjoyment do you get from leaving an estate behind when you’re not here to see it?

Wouldn’t it be so much more rewarding to share these gifts while you’re still around to see the good they do?

The bombshell

Want to know the age most people actually receive their inheritance? If you guessed 58, x gets the square! According to Federal Reserve data, the median American inherits at about age 58. Vanguard’s research puts it closer to 60.

So ask yourself: when could your children use this money more? In their 30s, when they’re making a name for themselves, newly married, raising young kids, and trying to make ends meet? Or in their late 50s, when their kids are grown, their careers are established, and they’re approaching retirement themselves? The research backs up what your gut already knows: an inheritance makes a much bigger difference for heirs in their 30s than for heirs closer to retirement.

I know which option I’m choosing 10 out of 10 times. Not for selfish reasons, but for maximum impact. Being there to witness it is just a pretty great bonus.

Take care of you first

I’m not suggesting you give everything away and live like a pauper. A financial planner’s first mandate is to protect our clients, and the real fear most people have isn’t being generous. It’s running out, or getting hit with long-term care costs nobody planned for. That fear is valid. The answer isn’t to sit on everything forever. It’s to know your number.

Once you know what you need to live comfortably for the rest of your life, with room to spare, everything above that line is a choice. Donald and Daisy didn’t give blindly. They gave from the surplus, and that’s what let them sleep at night.

Doing it the smart way

Giving while you’re living can be done thoughtfully. Annual gifts can move money to your family without touching your lifetime estate exemption. Tuition and medical bills paid directly to the school or provider don’t count against your annual limit. 529 plans can be front-loaded for grandkids. A family meeting can make sure everyone understands the plan, so a gift doesn’t turn into a sibling rivalry.

And for some of you, maybe this gives you permission to spend more on yourself and forget about those pesky children. That’s fine too. The point is to decide on purpose.

Give with a warm hand

You spent a lifetime building this. You’ve earned the right to see what it does. Decide what you want your dollars to do, and when, while you’re still here to watch it happen.

As always, stay wealthy, healthy, and happy.