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The first is adequately providing for a surviving spouse/partner. While this can be accomplished in different ways depending on circumstances, there is absolutely no excuse for leaving a survivor with financial stress, none.
For our part, Connie has survivor annuities from my pensions, Social Security, life insurance covering two years expenses, her own very small annuity, income from our investments and the portfolio itself.
Needless to say, the age difference between partners is a factor in any strategy.
The second issue is leaving a legacy for family- children and grandchildren. There are different opinions on this one ranging from “they need to make it on their own” to mine which is to the maximum extent feasible, give them a helping hand. However, this does not mean depriving yourself or adversely affecting a retirement lifestyle.
Even the super rich have unique views. Buffett says he will leave enough so his children can do anything, but not nothing. Gates will leave his children 1% of his assets – gee only about $1 billion. Hope they don’t feel deprived.
Legacy is very personal. If that is a goal, should it be delayed as an inheritance or given before? I tend toward the former just for our protection such as in the event of expensive inpatient LTC – even though we both have some LTC insurance, but we compromise.
We fund grandchildren’s 529 college plans now. We share most of each RMD between our children and charities, plus occasionally provide other help as needed. Connie and I differ a bit on how much, if anything, we should leave directly to grandchildren-yet to be resolved.
The issues can be complicated, can be difficult to think about, but doing so is really important.
Dick, thanks for the thought provoking article.
We are currently in the process of reviewing our wills, so this is very timely.
We have 2 daughters. Our youngest has a very good handle on personal finance, and will be fine. Even without our help we are confident that her finances will be well managed. But as / when needs arise, we will provide her with any reasonable financial support she might need.
Our eldest daughter has some intellectual disabilities. She can work in a supported employment situation, and has a driver’s license. She earns some income, but relies on a mix of earned income and government pension (disability support). She has poor finance and maths skills.
My wife and I are grappling with how to provide appropriate financial support to both our daughters, particularly our eldest. Too little money will not be helpful, but too much money is likely to lead to wasteful and irresponsible spending. It would also likely attract several people that might prey on her generosity if they find out she suddenly has funds available.
We are working through a suitable arrangement and are nearly complete, but it is a very difficult thing to do well.
** Not looking for advice, just giving another perspective on the challenges of making the best of our financial good fortune. It’s never as easy as it seems! **
I can relate to your situation, we have something similar within our family and it is not easy.
My first priority is making sure Chris will be okay after I’ve exceeded my shelf life. She will have my substantial Social Security benefit, a small pension, as well as IRA’s and brokerage accounts. She will be okay.
My kids do very well, and have informed me they have no need for an inheritance. Chris does not have children, making legacy planning unnecessary. This is not to say we don’t have beneficiaries properly named,
Although we are 73 and 70, we have not begun to spend down. We don’t deprive ourselves, we have what we like, but the fact that we have no long term care insurance creates some uncertainty, and caution.
If we die with money left over, I suspect my daughters will either give it to their kids, or donate to charity. I am happy with either.
I agree with the following Dan, “but the fact that we have no long term care insurance creates some uncertainty, and caution.”
We gave both children a fair sum for Christmas after we received an inheritance from my parents (we considered it a last Christmas present from them). As for further significant gifts that won’t happen until we are gone. As I have read from many the best gift you can give to your children is living in a CCRC so they don’t have to rush over to take care of you in your homelike we had to do for my parents. We also won’t know for about another 10 years if we will qualify health wise for the CCRC when the time comes so need the money to fund potential LTC.
David — I agree with your comment about “the best gift you can give to your children is living in a CCRC”. I’d suggest it also applies to one’s spouse. Gene
And to yourself – especially if you’re single.
Agreed.
I’m not concerned about financial survivor distress. My assets and portfolio are designated to Suzie, and in fact, my wife has a larger retirement account than I do.
My focus is more on helping family in the present. The way I see it, assistance is better now when family members are younger and the money has more utility—when it can more make a difference. That’s more valuable than giving it to them later, when they’ll likely be in a better financial position anyway.
You benefit from a system which has relatively high thresholds on inheritance tax such that you can play both sides and choose to die like King Tut.
In the UK, even quite modest estates can pass the IHT threshold so earlier gifting and certainly inheritance on first death (when it comes to assets that may yet appreciate most) can become highly relevant.
There is clearly a case to pass direct to grandchildren as likely they benefit most from funds for their early housing, further education or own lifesavings snowball. Of course there all the associated pitfalls of too much money too soon like it acting as a barrier to making their own path, spendthrift partners, still forming adult character…..
Generational gaps and life expectancies now seem to lead to people themselves being retired or on the cusp when they actually get an inheritance. For those that have planned it is not necessarily that significant for others it might be the lifesaver.
I see you have very low limits unless inheritance goes to a spouse. No wonder so many of those beautiful old homes are owned by the National Trust.
There is plenty of classical art that is also owned by HM Treasury for the same reason.
Spousal exemption is really only deferring the issue and allowing pooling of double thresholds unless you wanted to get into a crazy remarrying cycle. Which leads to another pitfall of disinheritance on remarriage.
Husband A dies. Husband and wife A have always intended their kids to get estate. Widow A remarries Husband B but they establish mirror wills leaving everything to each other first. Widow A dies, Widower B then leaves everything to to his own offspring.