It is common for many people to think about the future of the inheritance they may leave behind for their children and even grandchildren.
But everyone has a different perspective on this idea. You’ve probably seen the bumper sticker that says “I’m Spending My Children’s Inheritance!” While it makes most of us chuckle, in most cases it’s probably meant as a joke. But not always.
There are some very wealthy individuals who have the attitude of “I’ll leave them a little bit but I am giving most of it to charity.” In those rare cases, “a little bit” is probably a lot more than most of us can comprehend. These two examples fall on the extreme ranges of the spectrum.
Most people who think about the inheritance they may leave behind for loved ones fall somewhere in between. As wealth advisors, we have found it to be one of the most emotional issues our clients deal with and consequently one of the more complicated items to discuss. Therefore, many times we are relied on to ask the difficult questions and sometimes be the “voice of reason” to help navigate through these waters.
Do you have enough to take care of yourself?
There are times when some folks are so focused on what they can leave for others that they haven’t asked the most important question. If you don’t have or won’t have the necessary resources and plans in place to take care of yourself, then thinking about what you might leave behind is a moot point. In fact, if this question is not addressed first then you could actually become a burden while you are alive to those you want to bless the most after you are gone.
If you leave an inheritance, what assets are potentially involved?
If you determine that you will have enough to take care of yourself and there will be assets to pass onto future generations, this is where it is time to start making a list. Here are some examples:
- Primary residence
- Second home
- Rental properties
- Retirement accounts
- Other investments or property
- A business
- Life insurance proceeds
- After the list is made, then a strategy for transfer of ownership can be created.
How often do you want your beneficiaries to receive their inheritance?
The next question involves deciding if you want your beneficiaries to receive equal shares or if you want it divided into different percentages. Another thing to think about is if you have specific requests; such as a family heirloom you want to go to a certain beneficiary. Probably one of the most common overlooked items is whether you want beneficiaries to receive their share as a lump-sum or if you want it paid out over time. There are multiple reasons for structured payouts, such as taxes, liabilities, or for family planning reasons.
Taking the next step.
Exploring all of your options many times takes a legacy planning team that includes an investment advisor representative, an attorney, and a tax advisor.