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My father-in-law, while certainly not a wealthy man, holds assets in the mid six-figure range. The subject of inheritance came up during a recent visit to his home in Spain, sparked by a conversation that my wife, Suzie, and I had just finalized updates to our own will due to the sale of my business.
I raised a specific suggestion for his estate planning: given that his three children are all financially secure and truly don’t need the inheritance money, would it make sense to skip a generation?
The primary benefit of this “generation-skipping” strategy is maximizing impact over mere convenience. Since the children are financially comfortable, an inheritance would likely be absorbed into their existing wealth with little perceptible change. By contrast, a potential distribution of maybe $75,000 to each of the seven grandchildren—whose ages range from 4 to 28—creates a foundational, life-altering impact. This approach transforms the bequest from a simple transfer of assets into a powerful, lasting legacy, helping the younger ones with university costs or providing a down payment on a first home for the older ones.
After thinking about my suggestion for a few weeks, he’s had conversations with my wife Suzie and his two other children, and they are all in agreement that it’s a good idea and it seems likely that this is the pathway my father-in-law is going to follow.
While the family is fully on board, it’s not a straight path forward. Because my father-in-law’s assets are in Spain, we’ve learned there are some complications due to Spanish inheritance law, often called ‘forced heirship.’ Essentially, the law there limits how much of the estate he can freely bequeath, meaning we’ll have to work closely with a local Spanish lawyer to ensure this generation-skipping plan can be legally executed.
Although it’s maybe an unusual idea, and not suitable for most families, his goal is to turn this future inheritance into a foundational life boost for the grandchildren. I was wondering if anyone in the humble dollar community has thought about this generation-skipping strategy, or been a beneficiary of one, and what specific impact it had on your early financial stability or key life milestones.
My wife and I agree that any inheritances that we might receive will go to our kids. The positive impact for them will be far greater than it might be for us.
This is a “problem” that I will not have, since neither of my children has children. I have jokingly said to them that I feel they conspired together to not give their mother and me grandchildren, so we would spend all of our money on them.
I retired in January 2024, and after reading Bill Perkins’ book, “Die with Zero,” I have begun giving our children cash gifts. My daughter received her first gift as a lump sum, while my son asked to receive his as a monthly inflow. (He was wise enough to consider that, as a lump sum, he might spend it unwisely.)
Some would say they can’t do that, because they don’t know whether they will need the money to support themselves, and if that is true for you, then act accordingly. However, as a 75 year old, married to a 71 year old and having a 47 year old daughter and 41 year old son, we are confident that giving cash gifts in the $10,000 – $15,000 range to both of them annually will not impact our ability to enjoy our own retirement. Should we experience a bad year or two in the markets, the gifts can be smaller those years, but as we are only taking 4% of our portfolio as income, that is also not a real concern. The majority of our income is Social Security (which covers 111% of our annual expenses) and annuity dollars, which equals @50% of our Social Security benefits, and which are 72% income tax free.
Our “estate” does not require any special level of estate planning, beyond common sense. Having the benefit of having been a financial services professional for over 50 years, and having a written plan, I am set in that area. I am also a firm believer in a statement Perkins made in his book, “It’s better to give with a warm hand than a cold one,” referring to the joy you can experience in still being here to see the enjoyment your children receive from your gifts. Waiting until you die to give your children (or charities) gifts denies you the joy of being here when the gifts are received and being enjoyed by your loved ones..
Something to think about!
I actually wrote an article last year for HD about receiving an inheritance from my grandfather’s trust, some 20 years after he passed. His wife, my father’s stepmother, was the beneficiary until she died in 2005. My father would have received the bulk of it, but he died before his stepmother did, so it was divided among my two siblings and me. For us, the windfall was extremely well timed because our older daughter was about to go to college.
My brother was single and benefited from an inheritance. He had neither wife nor kids. His thought was that neither my sister nor I needed his money, so he left it to his nephews – my two sons and my sister’s son. My brother unfortunately passed away about eight years ago, when the nephews were in their late 20’s.
After receiving the inheritance, I know that one of my sons used much of that windfall to relieve debt that he and his wife accumulated. My other son pretty much still has it in a Schwab account. I don’t know for sure about my sister’s son, but if he is like his parents, he still has it all.
My plan is much more complicated, because my wife and I both have kids from previous marriages. Very few of our assets are jointly owned. We have wills and trusts that are designed to protect assets for passage to our respective children.