In my last post, I noted that, going in to your estate planning process, you need to answer three fundamental questions:

1. How many of the resources God has placed in your hands do you need in order to live your life as you believe you ought?
    
2. How many of the resources God has placed in your hands will benefit your heirs to help them live their lives as you would like them to be able to live?

   And, finally,

3. To what causes do you want to give what’s left over?

I said that, if you walk in without answers to those three questions, I can almost guarantee that your estate planning attorney will answer those questions for you . . . based on assumptions he or she will make in your behalf.

And what might those assumptions look like?

Here’s my experience. Most estate planning attorneys will assume you want to minimize taxes and, upon your death, pass everything you’ve saved over the course of your life–as much as possible–to your heirs: your children and grandchildren.

And beyond that?

“No assumptions.” –What else could you possibly want?

Well, let me raise some questions to see if even these assumptions are really what you want.

And in this post I hope simply to address the assumption of estate-transfer timing: the idea that your estate should pass to your heirs at your death.

I have briefly touched on this issue before. (See, among others, my Estate plan documents: What are your goals?, Estate Planning v Legacy Planning and Good estate planning is often NOT good tax planning! posts.) But here I would like to go a little deeper. Just a bit.

If you are already in your 70s or 80s or 90s, your children are already likely to be of middle age or older–in their late 40s, 50s, or 60s. And for them, how big a difference will the inheritance they receive from you really make–either for good or ill? May I suggest: not much? (Which raises some interesting questions of its own . . . supposing I’m right. –And I hope to address those questions in a subsequent post.)

But if you are in your 40s, 50s or 60s, and your children are still in their teens, 20s, or early 30s: what difference might an inheritance make to them at this point in their lives–again, either for good or ill?

If they have been properly prepared, and especially if you are able to coach them in wise use of the funds, could an investment of several thousand dollars (or more . . . –depending, of course, on your financial capacity) . . . –Could such an investment make a significant difference in your children’s lives for good? Perhaps, for example, if you were able to help them make a sizeable downpayment on a modest house? Or you were able to make an initial start-up investment in a new business venture? Or you were able to help relieve them from crushing college debts?

You are likely at your peak earnings potential right now; your children–a long way off from their peak earning years. So if it is in your power to help them significantly now, why wouldn’t you (again, assuming you have carefully prepared them for such a transfer of wealth, assuming you provide them good counsel, and/or you place good protective measures in place to assure your heirs do not squander or misuse your gift)?

******
Supposing you are able to offer these kinds of modest but very reasonable and helpful aids to your children; and supposing you still have assets to invest in future generations, many estate planners will then raise the issue of the Generation Skipping Tax (GST) and various strategies for passing assets along to your children’s children (i.e., your grandchildren) . . . and generations beyond.

And this is certainly a worthy consideration. But now I ask a question almost opposite the one I asked about your own children: At what point will you permit your children to take responsibility for their progeny? Shouldn’t they bear some of that burden? Wouldn’t it be good for them to shoulder some of it?

“Well, yes,” you say. “Some of it. But we can certainly help.”

Okay. So you help them (your children) a bit by helping to initiate college fund accounts for each of the grandkids. But suppose you provide “only” modest funding–”early” (when the grandkids are first born, perhaps, and not later, when they are actually heading off to college)–again, so your children bear some of the responsibility (and the grandkids, too!) and take pride in their own achievements, unfettered by your (i.e., the grandparents’) “long shadow.” . . .

So . . . supposing you bless your children–and their children after them–”early” (compared to “at your death”): How much “more” do you think you’ll need to add to their nest eggs when you die (likely 30 years from now . . . or more)? How significant a difference will such “later” gifts make in their lives? Is there any reason at all to transfer more money into their hands at that point?

I can imagine there may be some good reasons. I am only wanting to ask the question for you to consider it and come to your own conclusions.

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I am told–and I can believe this is true–for most heirs, the most significant inheritances they receive are often not things of great monetary value, but, rather, objects of sentimental value, items that remind them of the benefactor who gave them the special gift.

So. Suppose that, rather than bequesting additional money or assets of monetary value: Suppose you concentrated your final gifts to your heirs on physical objects of shared memories and emotions?

I expect that, if you were to follow a path shaped even a little bit by some of the questions I have raised here, your answer will shift quite dramatically compared to the second assumption most estate planners make.

But that assumption is something for us to address in my next post.

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Fourth in a series of posts inspired by a presentation by Jay Link of Kardia Family Wealth Planning. Previous post in the series: Three fundamental estate planning/legacy planning questions. First post in the series: Two family CEOs.

Technorati Tags: assumptions, estate planning, inheritance, legacy, legacy planning, when to give

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