Blog - Of Princes and Princesses

“It’s a boy!”

The royal cry rang out across the world July 22nd, announcing the birth of Prince George.  News, stories, opinion pieces, blogs, tweets, posts and photos of the little one and his parents have continued to echo around the world in the last month.  And it certainly won’t stop as he grows and progresses, gets into trouble and achieves greatness.  Who knows exactly what the future holds for that boy.  Some applaud and think how lucky he must be.  He’ll ‘have it all.’  Others take pity thinking of the unwanted, unasked for fame, the responsibilities, the lack of privacy, and certainly the future public scrutiny and criticism.  Some may expect him to become nothing more than a spoiled brat.

I wonder what the new parents think about his future.  Although they live in a world and a class that is much different, I expect they have many of the same worries, concerns, hopes and aspirations for their new baby as any new parents.

What does this have to do with you and financial planning? Well, many of us have our own ‘princes’ or ‘princesses,’ whether they be our own children, stepchildren or children-in-laws.  Maybe it is a niece or nephew. Maybe it is the grandchildren.  Some are still young, new to the world, while others may have grown and are well into their adult years.  We worry about each of them, their future, and hope the very best for them, nothing less.  Financial matters are no exception.  Yet, many vary in their opinion on the best way to financially benefit and teach loved ones appropriately.

As income grows or resources accumulate, or perhaps as we age and our own financial goals simply become less of a priority, it is natural to wonder how to best transfer financial blessings and lessons to these loved ones. Fairly recently, during an estate planning meeting, one client asked me an excellent question: is it better to leave wealth to heirs at death or gift it to them while alive?

I wish I had the one right answer to that, but there really is not one that fits every time, for everyone!  Still, I thought I would share with you the following points as you decide what is right for you.

Reasons favoring leaving assets as an inheritance:

  • You have some concerns about your own financial security or reaching your financial goals now or through retirement.
  • You want to ensure that while you are alive, you do not become a burden to your children, particularly if you had to deal with a medical or long-term care need in the future.
  • You have a significant amount of debt that your heirs will have to deal with if you don’t take care of it yourself today.
  • You don’t want your heirs to learn to depend on gift money, particularly when they are in their own adult years.
  • You don’t want heirs to get spoiled or develop an entitlement attitude by having excess resources available to them now.
  • You are concerned that a recipient is not ready for a gift, would mismanage it, or completely blow it.
  • You are concerned that by making an outright gift today, the asset may become accessible to a recipient’s creditors for future debts/liabilities.
  • You are concerned that assets gifted today would become commingled and available to a recipient’s spouse, particularly in the event of a future divorce.
  • You have significant appreciation in assets, the taxes on which can be avoided for everyone if left as an inheritance.
  • You struggled financially, worked hard and learned a lot building your own financial plan without significant gifts, and you feel that it is a beneficial process that you would rather your own loved ones go through for themselves.

Reasons favoring gifting while alive:

  • Your princes and princesses legitimately need financial help that you would like to give and you are able to give now.
  • You’d like to see your loved ones enjoy the money and to use it while you are alive.
  • You want to ensure that the right people actually receive the assets and that they can enjoy it while they are alive. We never know for certain who or when death will call.
  • You feel that some financial gifts may be an opportunity for the recipients to learn financial responsibility and accountability, which you could help mentor and foster while alive.
  • You want to involve and interest the recipient in a business or investment.  For example, gifting an ownership interest in a privately owned small business to incentivize a child to learn and grow the business. Word is that Warren Buffet would gift shares of stock to his family members at Christmas to help stir their interest in investments.
  • You are in a high tax bracket and would like to shift what income you can to your loved ones, who are in lower tax brackets.
  • You are dealing with estate or other income tax issues that may be helped by gifting assets now.
  • You want to ensure that your own unprotected assets are not available for your potential creditors and liabilities that could arise in the future.

For virtually everyone, it becomes a blend and balance of the two.  For some, likely for little Prince George, it has the potential to become a very complex and intricate blend, depending on the goals and objectives involved.   After you’ve determined your own top-level best philosophy, work with your financial planner to get to the specifics that best fit.  Then you can focus even more attention and energy staying in touch and keeping up with your princes and princesses!


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