Taking financial and non-financial elements together, it makes more sense to view inheritance as a lifetime exercise, rather than something to do with death. Most importantly, giving while you鈥檙e living allows you to enjoy your wealth alongside your family.

A difficult topic

Inheritance sits at the intersection of two difficult subjects鈥攎oney and death鈥攕o it鈥檚 little surprise that many families choose to put this off as long as possible. According to a 蜜豆视频 Investor Watch survey of nearly 2,300 US investors, 56% of US benefactors said that it鈥檚 not a pressing issue to discuss plans with their heirs, and 51% of heirs felt it was a depressing topic.1

Our data on inheritance further suggests another pattern of procrastination: annual lifetime gifting is a less commonly used tool than end-of-life bequests. The bulk of wealthy families鈥 inherited assets go to heirs in their 50s and 60s, contrary to the popular image of heirs and heiresses being 鈥渢rust fund babies鈥 in their 20s and 30s. Setting aside estate and tax planning considerations, is the ideal distribution schedule for benefactors or for heirs?

The worst time to give an inheritance is after you鈥檙e gone鈥攚hich is unfortunate, because that鈥檚 seen as the definition of 鈥榠nheritance鈥.
Justin Waring, APMA庐, CFP庐
Investment Strategist Americas
蜜豆视频 Global Wealth Management Chief Investment Office

A framework for pursuing your goals

The 蜜豆视频 Liquidity. Longevity. Legacy. framework2 helps you sort out your lifetime goals and how much you need to fund each strategy. This, in turn, helps you identify the assets you can safely earmark for the Legacy strategy, which is devoted to improving the lives of others.

While knowing the dollar amount is helpful, you still need to decide what you want to accomplish with this wealth, making sure that you pass along as much as possible to your loved ones and as little as possible to the IRS. The wealth that you built over your life can go to three destinations: the people who you care about, the causes that you champion or the government. If you have a good estate plan, you can choose two out of three.

Three questions that need to be answered:

  1. How much do you want to give?
  2. When should you make the gifts?
  3. How transparent should you be with your heirs?

Making gifts more meaningful

It鈥檚 useful to ask yourself a fourth question: How can you make your gift more meaningful? Although the word 鈥渕eaningful鈥 can sometimes refer to size, bigger isn鈥檛 necessarily better. First, economic theory tells us that small gifts are better than a single large gift (of equivalent value) due to 鈥渄iminishing marginal utility鈥 (e.g., the first doughnut is way tastier than the twelfth). Second, it鈥檚 not clear that giving money to your kids in their 50s and 60s will make the most difference in their lives.

Delaying your gift will allow you to give more without risking your retirement plan. It's also true that giving money to children when they鈥檙e too young can be 鈥渓ife changing鈥 in all the wrong ways. Most parents want to give their kids the tools and freedom to take risks but not so much wealth so early that it becomes counterproductive. It can even be frustrating and counterproductive if it鈥檚 a surprise gift, because if they knew to expect that wealth, it could have given them more flexibility.

These are complex considerations, and every family is unique. Make sure you work with your financial advisor to coordinate your estate planning, tax and investment strategies as a comprehensive framework.

1蜜豆视频 Investor Watch, 2022.

2 Time frames may vary. Strategies are subject to individual client goals, objectives and suitability. This approach is not a promise or guarantee that wealth, or any financial results, can or will be achieved.

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