Estate planning should be a serious exercise everyone with an accumulation of assets should undertake, and financial planning should be an ongoing event no matter your age or status in life. For seniors, ensuring enough funds are available to fund their retirement years is paramount. But what about this school of financial planning thought: Don’t Die Rich!
This “die broke” thought-provoking idea is based on a desire that money is best used while you are around to see the benefits. Years ago, inheritances were used to assist the next generation to make a living, with parents hoping for their children to have a better life than they experienced. In today’s world, most parents provide their children with the means to make a living through advanced education or other life experiences. After ensuring that their offspring are adequately pursuing the American dream, the parents typically consider their remaining wealth, which may consist largely of individually held stocks and bonds, retirement funds, real estate and other financial assets. Because of lengthening life spans, these parental assets often are not inherited by their children until the children themselves are getting close to retirement age.
So by adhering to the “Don’t Die Rich” theory of planning, how do you put your wealth to work? Consider the following:
- You come first. Enjoy yourself. The first beneficiaries of your estate should be you. There is nothing wrong with enjoying your wealth in ways that your family can share. For example, take your grandchildren on a nice trip or cruise. Perhaps purchase a beach or mountain home that the whole family can use. Look for opportunities that interest your family and provide ways to connect with them.
- Begin spreading the wealth now. Gifting or making even modest financial transfers to your family heirs now, while you are around to see the results, may prove more worthwhile than leaving them a large inheritance in the distant future. Assisting an heir with the purchase of a first car, or helping with current education costs, or even starting a 529 educational fund are examples that would be in order. If larger funds are needed for education, starting a business, or purchasing a house for potential heirs, you may want to create an investment trust to meet your objectives. Your trusted financial adviser and estate planning attorney can explain any tax facts that you need to consider, such as the annual gift exclusion rules. According to federal tax law, you may gift annually up to $14,000 per individual with no estate or gift consequences. By the way, for 2016 an individual can leave $5.45 million to heirs and pay no estate tax. A married couple will be able to shield $10.9 million from estate tax. By gifting to heirs during your lifetime, you have the added benefit of seeing how they spend the funds.
- Consider charitable giving. There are many benefits to making a major charitable gift during your lifetime. There can be significant tax benefits to you and of course, you will enjoy seeing all the good works that your money is providing the charity or charities of your choice. If you use a charitable remainder trust, you can place money or securities in an irrevocable trust for the charity of your choice while reserving lifetime income payments to you. When you die, the income payments stop and the remaining trust assets are delivered to your charity. There also are other trust-related charitable giving programs. Again, you should consult your tax, financial planner, trust officer, or attorney for details.
Of course, the “Don’t Die Rich” plan is not for everyone. But the underlining appeal of seeing the benefits of using your money while you are alive does have its merits. Think about it!
Old North State Trust, LLC (ONST) periodically produces publications as a service to clients and friends. The information contained in these publications is intended to provide general information about issues related to trust, investment and estate related topics. Readers should be aware that the facts may vary depending upon individual circumstances. The information contained in these publications is intended solely for informational purposes, is proprietary to ONST and is not guaranteed to be accurate, complete or timely.
Susan Willett is the director of trust services and oversees all aspects of trust administration for Old North State Trust, LLC. Old North State Trust, a North Carolina chartered trust company, provides: asset management services; income, estate and trust tax consulting; retirement planning and administration; and trustee and estate services to both individuals and businesses. Old North State Trust professionals have many years of experience and for over a decade have assisted clients in identifying and reaching their financial goals. For more information, visit www.oldnorthstatetrust.com or call