Giving Money and Inheritance

If you have successfully accumulated wealth, there will likely be quite a bit remaining after you die.  Just as you were conscientious with your money while you were growing wealth, you should be equally conscientious when leaving it to the next generation.  Without appropriate planning, the inheritance could be a curse rather than a blessing.

Hopefully you have instilled the same values in your children as you have used yourself, and therefore they will be fairly well off  by the time you pass away and really not need your money.  You of course could help them along their way further, but it might be more meaningful to do something for generations of your family beyond them.

For example, you could create a trust that pays for the tuition of your grandchildren and their descendants if they choose to attend college, or maybe just gives them an emergency fund to start their lives or the down-payment for a house.   Invested correctly and managed well, there is no reason that this trust could last for many generations.  This would be a much better legacy than simply passing the wealth down until it inevitably lands in the hands of a playboy who squanders it.

You might also consider giving a lot of your wealth to your heirs before you die.  Rather than having them fight over your estate when you pass, you can start giving funds that you know you will not need as gifts each year.  (These gifts might come with the stipulation that they will help you with expenses in your old age if needed.)  While this may take time, given that you can make gifts to your children, their spouses, and even their children each year up to the limit before gift taxes kick in, you can transfer quite a bit of wealth over a decade or more, all tax-free.  Of course, careful planning with an accountant should be done, since Federal laws change from year-to-year, and each state may have its own rules.

Other things to consider with inheritance planning:

  1. Make sure you have a will and that it is valid.  It is worth paying a couple off hundred dollars to do this right rather than using a $50 do-it-yourself will that may not stand up in court.  Make sure that signed copies of your will will be available to your personal representative, maybe giving them a copy to hold.
  2. Update your beneficiary information for your accounts as much as possible.  These accounts can go straight to your heirs very easily.
  3. Consider setting up a trust, and include assets such as your house and cars if you have a large net worth (about $1 million dollars or more).  This can help avoid the hassle and expenses of probate.
  4. Make sure everyone knows your plans ahead of time.  If you are planning on cutting someone out of the inheritance, let them know while you are alive rather than leaving your heirs to fight things out after your death.  Once again, consider giving some of your funds while you are still alive.


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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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