Inheritances: Give Now or Later?
I work closely with my clients to plan their financial strategy for their retirement years and leaving behind an inheritance for one’s children to enjoy following their passing, is a common wish that I often work with my clients to plan for.
But more and more, I am hearing clients ask about gifting their children with their planned inheritance now, rather than waiting until their passing. And, if that client is financially comfortable – it is definitely something worth exploring. For many adult children, receiving an inheritance in the present rather than waiting can mean the difference between seed money for a new business or deferring their dream. It can mean a private school education for a grandchild or a bigger home in a better zip code for your child’s growing family. The best part is that you will be around to watch your children use your money to achieve their goals and, often times, change the trajectory of their lives. An early gift can be incredibly fulfilling for everyone involved.
If you’re considering the idea of giving your children their inheritance sooner rather than later, here are some questions for you to consider to determine if the idea is a sound one.
Be Careful Not To Over Give
It will undoubtedly be fun to give your children money now and get to watch them enjoy it – but it must be said – be conservative with your gift. Work closely with your financial planner and your estate lawyer to ensure that what you will need to sustain your lifestyle stays put. Don’t trade in your own financial well-being in favor of a grand gesture.
Don’t Decide Alone
Talk to your children. Some of your children may make the most of your money now. Others may wish to wait for their inheritance – but you will never know unless you ask. What’s most important is that you understand what each child’s needs and wishes are so that you can strike the right tone and spare the family drama.
Consider Who Your Kids Are
You will never really know how your children will use the money that you give to them beforehand. Do realize, however that if you’re alive, you may find yourself with opinions as to how and what they spend it on. And, while you will certainly have opinions – it won’t be constructive to share them. Before you give, assess who your children are, and whether you’re likely to be more or less comfortable with how they decide to spend or invest your gift. If the answer is less comfortable…you may wish to wait to give them money after you’re gone.
If You Want More Control, There Are Lots of Ways To Give
Some choose to fully fund their grandchildren’s education by maxing out their 529. Others choose to enjoy their wealth with their families by sponsoring big family vacations to foreign countries that their children may not be able to afford with their young families. If you’re concerned about how the money might be spent, you can be creative about how you give rather than what or when….