Heaven can wait: Early inheritance
By Joel Dresang
After reading his memoir, I reached out to Mark Suwyn, the father of a friend of mine. His book, “When a Door Opens,” is a Horatio Alger tale of a hard-working farm boy who pursued education and opportunities to become a corporate titan and philanthropist.
Among the revelations in the story is that Mark and his wife, Patt, have committed to giving while living. Instead of making the children wait until the parents die for inheritances, the couple is disbursing the children’s shares of the estate now.
Mark and Patt started their family young and realized that by the time they pass away, their three children could be in their 60s and 70s.
“At that point in their life, are they going to take up actively managing wealth? Probably not,” Mark wrote to me. “So, we challenged them to come up with a plan to manage the wealth coming to them using any resources they wanted, including my advisors. They had five months to develop plans on what they would do with their inheritance.”
Mark reviewed each plan and dispensed the first of three installments of their inheritance. Two years later, each child made a progress report, and Mark made the second installment. Another review is scheduled for 2024.
Mark says he was fortunate to have amassed enough in his 80 years to take care of his and Patt’s needs and have money left over for the children and charities. The children are 60, 54 and 52. Besides giving them their inheritance while they still have years to enjoy it, Mark has been able to watch how they handle their windfalls.
“To (just) hand them a pile of money would be poor judgment on my part,” Mark explained.
What the Suwyn family is doing is extraordinary. But it is not unprecedented.
In an article on the greatest wealth transfer in history, the New York Times reported on “the bursting popularity of ‘giving while living’ — including property purchases, repeated tax-free cash transfers of estate money, and more.”
In a report on leaving financial legacies, Merrill Lynch called giving while living “one of the biggest shifts in mindset around inheritance.” According to the study, 65% of Americans plan to give away some of their wealth while they’re alive; 8% favor giving it all away before they die.
Of course, not everyone can afford to leave much of an inheritance, let alone hand it down early. About half of American households risk not being able to afford their living standards in retirement, according to the National Retirement Risk Index. A recent study by Fidelity Investments found that 52% of Americans are on track to run out of money in retirement.
And I’m distinguishing these legacy gifts from financial support for grown children, which also is prevalent. A 2023 survey by Savings.com found that 45% of parents with adult children who don’t have disabilities are supporting their kids for an average $1,442 a month.
The giving-while-living legacies involve more than providing a monthly food allowance or a rent-free bedroom or cellphone service. They offer wealth through which grown children can invest for their own long-term financial plans.
What any investor can learn from the Suwyn family includes such merits as:
- having a plan
- talking with your family
- involving an advisor
- talking some more with your family
Art Rothschild applauds the intergenerational passage of wealth “and the benefit of sharing the skills and values necessary to perpetuate it.”
“I learned to invest from my dad and my grandpa,” Art says. For some investors, he says, giving while living is worth considering.
“Once you’ve reached the point that you don’t need to spend all of it, you can afford to give it to your kids and thereby impart upon them the discipline or help them learn what they should be doing,” Art says. “I think it’s a great idea.”
But Art also sees reluctance to give legacies while living. Part of it, he says, stems from a mindset that worries about early bequests enabling heirs to be spendthrifts. The chief obstacle to giving while living, Art says, is an insecurity about how much an investor will need for retirement.
Of course, Art advises, investors need to make sure they have enough money properly invested to cover their lifetime expenses – including unforeseen emergencies. After that, they can look into distributing what they don’t think they’ll need.
“You have to think it through before you’re confident. But that’s what we’re here for,” Art says. “It’s psychological and financial.”
Many people haven’t done the math.
The latest annual survey by Caring.com shows less than half of Americans older than 55 have estate plans. Among those earning more than $80,000 a year, the top excuse for not having a plan is they “haven’t gotten around to it.”
“The puzzle to me is that most do nothing,” Mark Suwyn shared with me. “I guess they hope they will never die or that somehow it will all take care of itself. After they pass, the fights and lawsuits begin.”
“It’s like everybody’s invincible,” Art adds. “Everybody’s immortal; no one’s going to die.”
Planning for the inevitable is taking on greater stakes. In the next 20 years or so, $84 trillion will pass down to heirs, the New York Times reported, with $16 trillion of it within the next decade.
Instead of putting off estate planning, Mark Suwyn is implementing it in advance. And he’s pleased with how his children have responded.
“We have a lot of friends going through this now when they are 80-85 with no real plan yet on what to do with the kids,” Mark wrote to me. “Their greatest concern is that the kids will blow it, versus save and invest it. We don’t have that concern, as this is now their money. And they treat it like it is.”
Joel Dresang is vice president-communications at Landaas & Company.
Naming beneficiaries: Communicate clearly, a Money Talk Video with Mike Hoelzl
Estate Planning FAQs, American Bar Association
Estate Planning: Power of Attorney, Financial Industry Regulatory Authority
Help for agents under a power of attorney, Consumer Financial Protection Bureau
Plan Now to Smooth the Transfer of Your Brokerage Account Assets on Death, Financial Industry Regulatory Authority
When a Brokerage Account Holder Dies – What Comes Next? by the Financial Industry Regulatory Authority
(initially posted June 30, 2023)
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