We are 65 and have used Donor Advised Funds for many years. Whenever equities really get ahead of themselves, we donate appreciated shares to our DAF in order to rebalance back to where our asset allocation should be. We also transfer over appreciated assets when our marginal tax brackets are unusually high for that year. The DAF has allowed us to become more familiar with our philanthropic goals, which in turn has made it easier to have a clearer picture of our estate plans.
One of us works for a company that matches 100% of up to $10,000 a year. So we make sure to donate at least $10,000 a year to causes we like. We also have no children and want to leave as much as possible to charity and are in the process of setting up Donor-advised funds.
Great Question! in his great book, “Die With Zero,” Bill Perkins discusses this in Chapter 5. Basically he espouses, “… giving with a warm heart vs.a cold hand” which is a sentiment I agree with whole heartedly.
As a new retiree, I am coming to grips with this presently. I have two adult children, 46 and 40. My married, 46 year old daughter has her Master’s Degree, is established in her mental health career, and is considering establishing her own individual practice. My 40 year old son is a veteran, college graduate, and has been willfully unemployed for 15-16 months, and is not looking for a job. His significant other is apparently paying all the bills and supporting them both.
I have been thinking about ways to “help my children” while I am alive, but I am faced with a dilemma. While I have no doubt my daughter would benefit from a gift of cash, should she decide to go out on her own, and I would fully support her decision to do so, with appropriate planning, giving my son any sgnificant cash gift would be “enabling him” to continue in a lifestyle of which I greatly disapprove.
I have offered to assist him in getting additional career education, in a skill or trade. I have offered to match his salary or wages from any job he takes, for 12 months, to motivate him to find a job and become a productive citizen. He remains content to sit at home, playing video games and hanging out on Facebook all day.
Over the past 10 years, I have given my children $10-$15K in cash gifts, (not including birthdays and Christmas) and my son two different cars, worth $15K-$18K each.
As to charitable giving, I have used QCDs in lieu of RMDs for the past three years. Since I am now retired (January, 2024) I have decided to reduce my charitable giving to 10% of my Social Security income, or $7,200 a year, increasing as my SS Benefits increase, over time. Previously I was giving my entire RMD of $12-$14K to our group of charities.
If my wife and I live to 88-92 (I am 4 years older than my bride) we will be leaving an estate of $2-8M, according to our financial planning software. It will be divided between our two children, assuming they outlive us, as hopefully they will. Neither of my children have given us grandchildren, so should they predecease us, it will all go to charity.
Only time will tell whether I give either child a significant amount ($50K+) but I am open to considering it.
This is Chris. My spouse and I have practiced the kind of giving Don talked about for most of our married lives. We found through the years that we could never out give God and we always had resources for what we needed. I would encourage any of the forum members to practice this if you don’t. I look back now and wonder how we were able to pay our bills, but we always did.
As far as our children, it was important to us to be able to see that they got an education. When they bought their first cars and homes, we gave monetary gifts for these, they were modest, but enough to help. We hope to be able to give them a modest sum on a more regular basis while we are alive. We are new retirees, so now is not the time, but it is something we are working towards if we can.
Our two 40 something children are not interested in financial planning, in spite of my generous offers of advice. After we retired and could no longer contribute to a Roth IRA, we switched over and fully fund their Roth IRA for them. I signed up as an authorized agent on the Vanguard account and make sure contributions are made and accounts are in order. It’s too important to risk their forgetting about it. I also go over it with them once a year and check performance. We fund a 529 account for both grandchildren. We are giving now and hope they will appreciate it in the future.
I think the answer is yes. Do both. The best answer depends on what/who you are giving to and when/how the money is needed. Giving money away regularly while one is alive is a key spiritual and financial practice that we have been doing for more than 30 years. That has mainly been to people and places outside of our family. As we get closer to death that will continue but we will also help our children and grandchildren today as we can with hopes to also be able to leave them something when we are gone. There are many tax benefits of giving charitably while alive as well as the emotional and spiritual gifts of doing so as well.
I think this is one of those questions where I think it depends. Everyone has to decide for themselves what’s best. In my case, both my wife and I have separate funds as we married late in life, so we each made our own separate decisions. I elected to move forward with disbursing some of my funds annually starting 4 years ago. In addition to the excellent reasons already mentioned by other commentors, I also was motivated by 2 deceased family members whose wishes really weren’t followed by their beneficiaries. They both had lawyer prepared trusts, but I observed how relatively easy it was for the beneficiaries to get around the trust for their own gain. Unfortunately, in both cases it wasn’t what I believe the deceased would have wanted. For myself, I’ll have the satisfaction of knowing that what I distributed while I’m alive actually went to whom I intended. But I realize further down the road I might observe unintended consequences of this decision, but for now I’m comfortable with what I’m doing.
We have a set percentage of our annual budget that we contribute to charity (which will increase soon when I am able to make tax-free contributions from my IRA).
Regarding our daughters, ages 35 and 39, my wife and I have gone back and forth, and finally settled on this approach: We have informed them that for as long as my wife and I are both alive, they will each receive no less than $X/year, which will be adjusted each year by the Social Security COLA. In this case, $X is presently enough to make annual payments on a sensible not-too-old used car even at the current daunting interest rates. X was determined using a Monte Carlo analysis where even horrible rates of return showed that an expenditure of $2X/year would not really matter in terms of our quality of life. In addition to that, though, we have told them that the older we get, the more likely they are to get more than X – it will just depend on how our investments do, and how long the old man hangs on (I will take SS next year at 70, and the difference between my dying at 75 and dying at 85 is pretty significant in terms of how much money we will have to take from our investments, not least because my SS will be almost twice my wife’s, and will replace hers when I die).
One of the things that most of the people who read this forum understand has been one of the hardest to explain to my daughters – the difference between a 1% and 2% real return over 20 years is impressive; the difference between 1% and 3% over the same period is astonishing. In our case, it is the difference between cutting things close and having more money than we could ever spend.
I have two sons, both married with young children. One son is a school principal and the other is in the financial industry. One family is financially sound and the other struggles with making ends meet. So far we have gifted each family the same amount of money and set up 529 funds for the grandchildren. We’ve considered custodial accounts for the grandchildren who have more need, but our financial advisor doesn’t think it’s worth setting up for them if it’s providing short term benefits. I struggle with equal gifting and giving out of need. Sharing your experience is appreciated.
NOW…….the wife and have no children and no family to leave it to so every week we go out to dinner at the same restaurant with different servers …..we tip at least 30% and give the bartender a $10 every other week or so and at Xmas give each a card with $100…..we feel it will help these hard working individuals with nothing in return…we do get great service and good food but that is because we are just nice people
We’ve given each of our four grandchildren enough for 1 year at a state university. We figure their parents should be good for 2 years, and it will be part of the grandkids educations to be on the hook for the forth year. We are also matching current earnings and contributions to Roth IRAs. I like to fantasize about each of our grandchildren going to a bank after graduation and having more money in their Roth IRAs then they want to borrow.
Another option would be to help your grandkids to start saving. Suggest that they take some of their earnings from their after school job and open a Roth IRA in a zero finance charge Index Fund (such as at Fidelity) and offer to gift them that amount after they make the deposit (their parent(s) will need to help them set up the account). Maybe for the next $1000 you could give them 50% or so. It will teach them the importance of long term investing and watching their investments and will be a lifelong lesson and be one of the best gifts they will ever receive.
It’s a personal choice, if you have the money to give. If you wait until you die to pass it on, your kids may already be retired. The need is greater while your kids are raising their own children, buying a home, paying for daycare and education, and other ancillary expenses associated with raising a family.
As soon as you can afford to do so , or maybe sooner. We are passing funds along since retirement, but we were spending ~$50,000+ a year in the eight prior years on education so both could go where they wanted, study what they wanted and graduate debt free.
This is a tough one, for many of the reasons already discussed. I’m all for giving as soon as possible, especially if you can help your children and grandchildren. The challenge is how do you know if you have enough for possible LTC care. It’s something I plan to keep looking at.
This is a subject I have no experience with. I’ve never inherited–or been otherwise gifted–any money. I have no idea if I’ll ever feel financially comfortable enough to part with any of my money before I die.
If I do find myself sitting on a sizable pot of money, I suspect I’d find great joy in seeing it put to good use by any number of charity organizations I would support.
Why wait? Giving away money is one of the most fulfilling things we can do. Do it now so you not only get the joy it gives (for you and others) but also to see the good it can do now.
I feel it is definitely best to give money away now as you control it, are possibly able to see the impact, and likely to receive positive feedback. Two reasons to wait are to be able to drip money out more tax efficiently over time and to retain sufficient money for your own personal needs.
Now with caution. I have been giving more in the last few years than normal. On the other hand, I want to make 100% certain if any form of LTC is needed for me or my wife, or both, the money will be there and we will never be a financial burden on our children. If the worst does not occur, they will still receive the money. My children will be in their fifties and later with children in college So need might be greater later than sooner
There’s something to be said for being timely with it. For me, I’ve always thought I should leave pre-tax money to charity (since they won’t pay taxes), Roth money to older heirs (10-year withdrawal requirement, no taxes owed), and after-tax money of highly-appreciated stocks/funds to any heirs (step up in basis, no income tax owed). But it’s not all about the numbers, and you can use annual gifting to reduce your estate value without paying taxes, and that is good since you can see your loved ones enjoy the money. What’s more, you can use charitable donation bunching and QCDs do give in a tax-smart away while you are alive.
We are 65 and have used Donor Advised Funds for many years. Whenever equities really get ahead of themselves, we donate appreciated shares to our DAF in order to rebalance back to where our asset allocation should be. We also transfer over appreciated assets when our marginal tax brackets are unusually high for that year. The DAF has allowed us to become more familiar with our philanthropic goals, which in turn has made it easier to have a clearer picture of our estate plans.
One of us works for a company that matches 100% of up to $10,000 a year. So we make sure to donate at least $10,000 a year to causes we like. We also have no children and want to leave as much as possible to charity and are in the process of setting up Donor-advised funds.
This is Chris. My spouse and I have practiced the kind of giving Don talked about for most of our married lives. We found through the years that we could never out give God and we always had resources for what we needed. I would encourage any of the forum members to practice this if you don’t. I look back now and wonder how we were able to pay our bills, but we always did.
As far as our children, it was important to us to be able to see that they got an education. When they bought their first cars and homes, we gave monetary gifts for these, they were modest, but enough to help. We hope to be able to give them a modest sum on a more regular basis while we are alive. We are new retirees, so now is not the time, but it is something we are working towards if we can.
Our two 40 something children are not interested in financial planning, in spite of my generous offers of advice. After we retired and could no longer contribute to a Roth IRA, we switched over and fully fund their Roth IRA for them. I signed up as an authorized agent on the Vanguard account and make sure contributions are made and accounts are in order. It’s too important to risk their forgetting about it. I also go over it with them once a year and check performance. We fund a 529 account for both grandchildren. We are giving now and hope they will appreciate it in the future.
I think the answer is yes. Do both. The best answer depends on what/who you are giving to and when/how the money is needed. Giving money away regularly while one is alive is a key spiritual and financial practice that we have been doing for more than 30 years. That has mainly been to people and places outside of our family. As we get closer to death that will continue but we will also help our children and grandchildren today as we can with hopes to also be able to leave them something when we are gone. There are many tax benefits of giving charitably while alive as well as the emotional and spiritual gifts of doing so as well.
I think this is one of those questions where I think it depends. Everyone has to decide for themselves what’s best. In my case, both my wife and I have separate funds as we married late in life, so we each made our own separate decisions. I elected to move forward with disbursing some of my funds annually starting 4 years ago. In addition to the excellent reasons already mentioned by other commentors, I also was motivated by 2 deceased family members whose wishes really weren’t followed by their beneficiaries. They both had lawyer prepared trusts, but I observed how relatively easy it was for the beneficiaries to get around the trust for their own gain. Unfortunately, in both cases it wasn’t what I believe the deceased would have wanted. For myself, I’ll have the satisfaction of knowing that what I distributed while I’m alive actually went to whom I intended. But I realize further down the road I might observe unintended consequences of this decision, but for now I’m comfortable with what I’m doing.
We have a set percentage of our annual budget that we contribute to charity (which will increase soon when I am able to make tax-free contributions from my IRA).
Regarding our daughters, ages 35 and 39, my wife and I have gone back and forth, and finally settled on this approach: We have informed them that for as long as my wife and I are both alive, they will each receive no less than $X/year, which will be adjusted each year by the Social Security COLA. In this case, $X is presently enough to make annual payments on a sensible not-too-old used car even at the current daunting interest rates. X was determined using a Monte Carlo analysis where even horrible rates of return showed that an expenditure of $2X/year would not really matter in terms of our quality of life. In addition to that, though, we have told them that the older we get, the more likely they are to get more than X – it will just depend on how our investments do, and how long the old man hangs on (I will take SS next year at 70, and the difference between my dying at 75 and dying at 85 is pretty significant in terms of how much money we will have to take from our investments, not least because my SS will be almost twice my wife’s, and will replace hers when I die).
One of the things that most of the people who read this forum understand has been one of the hardest to explain to my daughters – the difference between a 1% and 2% real return over 20 years is impressive; the difference between 1% and 3% over the same period is astonishing. In our case, it is the difference between cutting things close and having more money than we could ever spend.
I have two sons, both married with young children. One son is a school principal and the other is in the financial industry. One family is financially sound and the other struggles with making ends meet. So far we have gifted each family the same amount of money and set up 529 funds for the grandchildren. We’ve considered custodial accounts for the grandchildren who have more need, but our financial advisor doesn’t think it’s worth setting up for them if it’s providing short term benefits. I struggle with equal gifting and giving out of need. Sharing your experience is appreciated.
NOW…….the wife and have no children and no family to leave it to so every week we go out to dinner at the same restaurant with different servers …..we tip at least 30% and give the bartender a $10 every other week or so and at Xmas give each a card with $100…..we feel it will help these hard working individuals with nothing in return…we do get great service and good food but that is because we are just nice people
We’ve given each of our four grandchildren enough for 1 year at a state university. We figure their parents should be good for 2 years, and it will be part of the grandkids educations to be on the hook for the forth year. We are also matching current earnings and contributions to Roth IRAs. I like to fantasize about each of our grandchildren going to a bank after graduation and having more money in their Roth IRAs then they want to borrow.
Another option would be to help your grandkids to start saving. Suggest that they take some of their earnings from their after school job and open a Roth IRA in a zero finance charge Index Fund (such as at Fidelity) and offer to gift them that amount after they make the deposit (their parent(s) will need to help them set up the account). Maybe for the next $1000 you could give them 50% or so. It will teach them the importance of long term investing and watching their investments and will be a lifelong lesson and be one of the best gifts they will ever receive.
It’s a personal choice, if you have the money to give. If you wait until you die to pass it on, your kids may already be retired. The need is greater while your kids are raising their own children, buying a home, paying for daycare and education, and other ancillary expenses associated with raising a family.
As soon as you can afford to do so , or maybe sooner. We are passing funds along since retirement, but we were spending ~$50,000+ a year in the eight prior years on education so both could go where they wanted, study what they wanted and graduate debt free.
RWW
My wife and I have a daughter with disabilities and we give at least the currant max each year so yes we feel its best to give early
Personally I think it best to give assistance when a person really needs it provided that it does not jeopardize your own retirement.
This is a tough one, for many of the reasons already discussed. I’m all for giving as soon as possible, especially if you can help your children and grandchildren. The challenge is how do you know if you have enough for possible LTC care. It’s something I plan to keep looking at.
This is a subject I have no experience with. I’ve never inherited–or been otherwise gifted–any money. I have no idea if I’ll ever feel financially comfortable enough to part with any of my money before I die.
If I do find myself sitting on a sizable pot of money, I suspect I’d find great joy in seeing it put to good use by any number of charity organizations I would support.
Why wait? Giving away money is one of the most fulfilling things we can do. Do it now so you not only get the joy it gives (for you and others) but also to see the good it can do now.
I feel it is definitely best to give money away now as you control it, are possibly able to see the impact, and likely to receive positive feedback.
Two reasons to wait are to be able to drip money out more tax efficiently over time and to retain sufficient money for your own personal needs.
Now with caution. I have been giving more in the last few years than normal. On the other hand, I want to make 100% certain if any form of LTC is needed for me or my wife, or both, the money will be there and we will never be a financial burden on our children. If the worst does not occur, they will still receive the money. My children will be in their fifties and later with children in college So need might be greater later than sooner
There’s something to be said for being timely with it. For me, I’ve always thought I should leave pre-tax money to charity (since they won’t pay taxes), Roth money to older heirs (10-year withdrawal requirement, no taxes owed), and after-tax money of highly-appreciated stocks/funds to any heirs (step up in basis, no income tax owed). But it’s not all about the numbers, and you can use annual gifting to reduce your estate value without paying taxes, and that is good since you can see your loved ones enjoy the money. What’s more, you can use charitable donation bunching and QCDs do give in a tax-smart away while you are alive.