Why Leave Your Children an Inheritance?

Why do you leave your children an inheritance?

For most of us, it’s just what you do. It's an instinctive desire that’s built into our nature. If you have resources, you want to leave them to your children.

But what if by the time you die, your children no longer need the inheritance you were kind enough to leave them? They are very thankful, but they are now established, and they don’t need it like they did when they were younger. But there was a time not long ago when they did need it. They were struggling to buy a house, start a business, or pay tuition and could have used some help.

Is there a higher virtue in leaving it all when you die versus gifting along the way? 

In his 1998 book Die Broke, Stephen Pollan, the father-in-law of Michael J. Fox, asks whether parents would get more joy and satisfaction from sharing their wealth with their children while they are living. 

Here are two client stories.

I Don't Need It, But My Kids Could Use It.

Several years ago, I was helping an older client administer her living trust following her husband’s death. Her home was paid off, and she had a lifetime monthly income from a charitable remainder trust that would pay her more than she would ever need. And she had other significant assets in her living trust that she said she would never need. 

During one of our meetings, she told me about her children’s financial challenges. One was starting a business, one was rebuilding his home that had been destroyed by a hurricane, and one was putting his life together after an ugly divorce. She said she wished she could help them. I told her that it looked like she had the means to help them now, and she could do so without incurring a gift tax. She was taken aback. She simply had never considered that she could make big gifts to her children now, while she was still alive and when they needed it most.

She was very excited when she called her children to tell them that her financial advisor would be transferring a big share of her accounts to them. She was happy, and of course, they were happy.

I Want to See My Family Enjoy My Money. I Won't See It from the Grave.

Another client was a retired orthodontist who had done well. He and his wife were set for life. But rather than store up their wealth, they used it to help their daughter buy a house, help their son remodel his house, buy cars for their grandchildren, pay college tuition for their grandchildren, and perhaps most importantly, they paid for many family vacations. They got a kick out of using their resources to help their children and grandchildren and to create unforgettable family memories. They wanted to enjoy their wealth with their family while they were alive.

There is no rule that you have to wait until you die to leave an inheritance.

If there is joy in giving, is there more joy in giving when living?