Readers, I had a similar question recently, so I’m updating this column previously posted in 2016:
Question: My wife and I have seen how much inherited money can ruin children and are not inclined to leave our money to children. We would like our hard-earned money to benefit those less fortunate, but we don’t want to completely exclude our children from the will. Is there a way to do both?
Responnse: Our laws allow us to give our money or leave it to whomever and however we choose, as long as it is legal and does not violate public order. So the short answer to your question is yes, when it comes to your heirloom, you can have your cake and eat it too!
Also, remember that money doesn’t always ruin kids or family relationships. Wealth can be used to bring families together and can even teach children solid lessons in money management and philanthropy. Some parents choose to start a private family foundation, and when asked about the most important benefits of such a private foundation, respondents to a survey from Foundation Source, a provider of support to family foundations, said: “To establish a tradition gift, making an impact on community issues imprints family values on the next generation.
If you have a large wealth and want to benefit those less fortunate, a family foundation gives you the opportunity to form a board of directors with your children and demonstrate to them the value of the gift. Additionally, running a foundation will teach children the skills to identify worthy charitable recipients, how to read and understand financial statements, how to invest properly that grows assets, and how family contributions can make a significant difference. in the lives of others.
If you think you don’t have enough assets to merit a private foundation, or if you prefer a more streamlined approach to such a giving and teaching opportunity, a donor advised fund, “DAF” for short , can achieve similar results. A DAF can be established with an institution like Fidelity or Schwab or with your local community foundation. You make tax-deductible charitable contributions to your CFO, and each year you and your family “advise” the financial institution or community foundation to donate to the charities of your choice. You are limited on how much you can donate each year, but if you want to start small or just don’t have enough to form a private foundation, a DAF is a great option. It can offer the teaching possibilities of a private foundation and is less expensive to manage.
If you’re more interested in using a trust to create something after your wife leaves, your document may provide for your assets to be divided between a charitable fund managed by a trustee and a segregated fund for the benefit of your children. A trained trustee can work with your children to teach them about the value of money and the pleasure of giving. Assets set aside for their trust can be used to get your kids to finish school, start a business, or buy a home.
Explore your options and find the one that’s right for you. As with all estate and financial planning, call in qualified advisors and always watch out for hidden expenses or pitfalls. You’ve earned your money, enjoy it and use it for the good of others – your way.
Liza Horvath has over 30 years of estate planning and trust experience and is a Chartered Professional Trustee. Liza is currently President of Monterey Trust Management. This is not legal or tax advice. If you have any questions, call (831) 646-5262 or email [email protected]