As a fee-only financial planner, I often work with people who are building out their estate plan. One discussion that almost always comes up is how much money should you leave for your kids and grandkids?
This is such a tricky subject to navigate. The truth is that the “right” answer is different for everyone. Factors ranging from how much retirement savings you have to comfortably incorporate into your estate plan, to what your relationship with your kids looks like, impact your decision. As you start to consider whether or not you want to leave money for your kids (and how much), it can help to consider a few key things.
Popular Opinion: Your Kids Inherit Your Estate
First, let’s just acknowledge that it’s a popular opinion that your kids will inherit your estate. However, just because that’s the “popular” way that people tend to set up their estate plan, it doesn’t mean it’s your only option. You can use your estate to:
- Provide money to other heirs – like grandkids, siblings, or even parents who may outlive you
- Provide financial assistance or other assets to close family friends
- Use your estate to support a cause or organization you’re passionate about
- Leverage your wealth to set up a trust or scholarship fund at your alma mater
The options are endless. Of course, if you want to give all (or a portion of) your estate to your kids – that’s great, too! Just know that you aren’t obligated to leave them everything (or anything) if you feel strongly about it.
Remember: How Are You Impacting Your Kids in Life?
Leaving a legacy doesn’t start when you pass away. Many of my clients are already paying for their kids’ college, or are heavily subsidizing it. They’ve done everything they can during their lifetime to make sure their kids and grandkids have a fantastic life. Sometimes I have to remind them that, while parenting may play a large role in their identity, and family may be a top priority for them, their wealth is not solely there to enrich the lives of their kids.
There’s a temptation to “save” your wealth for your kids. Of course, there’s absolutely nothing wrong with that if that’s what you want for your money and your life. However, it’s also important to enjoy your life before and during retirement, and to focus on leaving a legacy that’s meaningful to you – and I’m sure your kids would probably agree with me!
You don’t want to sacrifice the things you’re passionate about just because you’re worried about taking care of your kids in your estate plan. This is where working with a financial planner and an estate planning attorney in tandem can be a huge help. Together, they can help you create a plan that is designed to accomplish a fun and fulfilling retirement right now, and a comprehensive estate plan that checks the boxes you’re worried about – from taking care of your kids to donating to your favorite local animal shelter.
There Isn’t a “Right” Answer – Give Yourself Some Grace
There are so many complicated emotions tied to leaving money to family – especially your kids. Let’s look at a fictionalized scenario as an example:
Pretend you have two kids – a son and a daughter. Your son has done well for himself. He and his wife are public school teachers, have a family of their own, and they get by on their two salaries – but aren’t overly comfortable, and haven’t started saving for their kid’s (your grandkid’s) college education. Your daughter, on the other hand, owns her own business and has been incredibly successful. Her husband is a private-practice psychologist, and you know their kids (and, realistically, their kid’s kids someday) will be well taken care of.
You have $3 million that you’ll most likely leave behind.
How do you divide it up?
Do you give more to your son who may need the money more? Do you split it equally to keep things even between your kids?
That’s not an easy decision to make. Remember to give you and your spouse or partner some grace as you think through these questions. Take the time you need to put together a solution that makes sense to you.
Have Open Conversations – But Stay Firm in Your Decision
It can help to have an open conversation with your kids about your estate plan so that nobody’s surprised. However, it’s important to start these conversations from a place of certainty. You’re here to inform your kids of your wishes and receive their feedback openly and honestly. You can start the conversation with a simple, “Here’s what I envision for my estate plan,” or, “Here’s the legacy I plan to leave.”
Remember – these conversations aren’t just about the dollars and cents! There’s going to be a lot of emotion that comes up. Even if your kids 100% respect your wishes, it could still be uncomfortable discussing your estate plan, which implies that you’ll pass away. Again, this is when having your financial planner or a trusted estate planning attorney in your corner can help. Want more information? Request a call with me today! I’m happy to help.