Transferring wealth to the next generation is a major part of estate planning, but few people discuss their philanthropic goals with their heirs.
CNBC’s recent article, “Don’t expect Mom and Dad to clue you in on your inheritance,” says that 8 out of 10 financial advisors said that “some” or “hardly any” of their clients involve the next generation in family philanthropy, according to a recent survey from Key Private Bank.
It would great for the older generation to get their children involved in the process, because they frequently don’t see eye to eye on philanthropic causes. As a result, it’s rare for a person to get their children and grandchildren involved in philanthropy. That’s one of the biggest mistakes parents make when they think of wealth transfer planning and preparing their children to be responsible heirs.
The IRS will allow you to transfer up to $11.4 million ($22.8 million if you’re married) to your heirs, either in gifts during your lifetime or in bequests at death, without the 40% estate and gift tax. Remember that charitable bequests are deductible, lower your gross estate and reduce the estate tax bill.
Donor Advised Funds are tax-advantaged accounts that people can open at a brokerage firm and fund with cash, securities and other assets. It’s important to establish the charitable vehicle, like a donor advised fund, during your lifetime.
It’s best to be open about your own values and the causes you want to support.
Children would like to participate in their inheritance beyond the financial assets. They also should understand what values were important for Mom and Dad.
Listen to your children and grandchildren, because younger generations bring a different view to the charitable giving conversation. Getting them involved early, will also prepare them to be good stewards.
One more thing: try not to rule from the throne. As your heirs get older and devote themselves to different causes, try to step back. Let them drive the charitable effort. Give them guidance and support.
Call (305) 443-3104 if you would like to discuss the future of your estate.
Reference: CNBC (September 18, 2019) “Don’t expect Mom and Dad to clue you in on your inheritance”