Another aspect of the intergenerational wealth transfer that should be part of the discussion is philanthropy. Many of our clients have charitable entities that they care about and contribute to regularly that should be included in their wills, so their children are aware. It might be a direct bequest at the time of death, or it might be money in a donor advised fund with instructions to the heirs on when and how to distribute it. This is an important part of any estate planning discussion because strategic philanthropic gifting can help reduce estate taxes with the end result being that more of the wealth ends up in the hands of the intended heirs rather than going to the taxman. We often suggest that clients reduce estate taxes by leaving higher-taxed assets, like retirement accounts, to charity. For example, now that all the money in an IRA inherited by a non-spouse must be withdrawn after 10 years rather than stretching for a lifetime, that may no longer be a smart asset for a client to leave to a child or grandchild.
We find that we’ve been having a lot of conversations around charitable giving at the end of life. We talk about that with the family, so they understand what your intentions are with what you’ve done. It’s important to have these discussions so your family knows what you want before it’s too late to ask.
Jason D. Field, CFP, is a financial advisor with Van Leeuwen & Co. in Princeton, N.J.