The Bible makes it clear that parents should leave an inheritance: “A good man leaves an inheritance to his children’s children” (Proverbs 13:22). But God’s Word also issues a warning: “An inheritance gained hurriedly at the beginning will not be blessed in the end” (Proverbs 20:21).
Deciding how best to transfer wealth is one of the biggest challenges facing affluent families. Henry Ford said, “Fortunes tend to self-destruction by destroying those who inherit them.”
Indeed, there is sobering evidence that an inheritance often hurts the recipient. Even an expectation of a large inheritance can diminish personal drive, sap motivation, and erode life purpose.
To help ensure that the inheritance you leave for your children and grandchildren will be a blessing, consider these suggestions:
Train your heirs.
The younger generation must develop financial wisdom before they can manage wealth. Unfortunately, some parents purposely make money mysterious or use it as a tool to control their children. You will have more influence over their behavior if you teach them how and why to handle money wisely. The worst thing you can do is transfer wealth if you haven’t first transferred wisdom.Design wealth transfer to develop character.
Some parents have designed incentives into their transfer of wealth to motivate their children to develop character, initiative, and work habits.Stan and Kay Watson decided to give each of their children their inheritance in the form of an investment in a start-up business. They invested both finances and experienced counsel to assist their children. The businesses have done well, but most importantly, this has helped the children mature into remarkably responsible young people.
Evaluate the impact on your heirs.
Financial author Ron Blue recommends asking three questions as you consider transferring wealth.
1. What is the worst thing that can happen if I transfer wealth to ________?
2. How serious is it?
3. How likely is it to occur?
Then repeat the questions in a positive form: “What’s the best thing that can happen if I transfer wealth to ________?”
Ask the questions for each potential recipient, whether it involves a child, grandchild, or charity. If you want to distribute your assets responsibly, the answers to these questions are crucial.Decide how much to give your heirs.
Pray and seek counsel. If you’re married, discuss this with your spouse. Take whatever time is necessary for the Lord to confirm His direction.Affluent people have reached a variety of conclusions. Some have limited inheritance to money for college or vocational training. Others have left sufficient resources to provide children with a start in life, but not so much that it undermines hard work and character development. A minority believes their children are wise and mature enough to trust them with large estates.
The amount may be different for each child.
As you contemplate choosing the next stewards of your resources, you may realize that some of your children are much better equipped to handle wealth than are others. And some have more genuine needs than others.We are to love our children equally, which often means helping them uniquely. They are unique not only in their character, values, commitment to Christ, and ability to deal with life, but also in vocation, health, and immediate family situation. These circumstances may influence how much you plan to leave each child, and, as circumstances change, you may need to adjust your plan accordingly.
Decide when to transfer
Many people wait until after death to distribute their wealth. Others choose to distribute some while they live and the rest through a will. Consider these benefits for giving your heirs some of their inheritance while you are living.
Giving now may be more timely for their needs.
Helping a young mother stay at home or enabling your children to send their kids to a Christian school may be much more beneficial than simply adding to their net worth when they are 50 or 60.Your generosity toward your children, exercised with wisdom, can open doors and alleviate financial burdens when it comes to things such as starting a business, buying a first home, or funding your grandchildren’s college education.
Giving now will help train them.
If you want to include your children in your will but are unsure about their ability to handle money, consider giving them a “training” inheritance while you are alive. Experience is a very good teacher, but coached experience is a great teacher. In other words, experience coupled with a mentor is of greater benefit.And you can be comforted to know that even though mistakes will be made with the money you provide now, those mistakes will help minimize larger ones with the amounts you leave at death.
Giving now may reduce estate taxes.
Under current law, you can give away, tax-free, $19,000 per year to as many individuals as you like. Married couples can effectively double this amount to $38,000 per recipient. Giving money away will shrink the size of assets that will be subject to estate taxes later.Stay out of the way of God dealing with your children.
As beneficial as current giving to your children can be, it is not always God’s will for you to solve their problems with money.The Lord may have other lessons for them, including learning to trust Him for their provision.
Funding the work of God now.
The same principles of deciding when to give apply to the work of Christ. Suppose your church or your favorite ministry has a current need to complete a God-directed mission. By waiting to give until after you die, you may have missed funding the most strategic opportunity for the ministry in your lifetime.
The wealth-transfer family conference
A family conference can provide tremendous benefits, including peace of mind. It gives your heirs the opportunity to hear from you — your heart, your wishes. It also gives them permission to ask questions. Although parents still make the distribution decisions, such a conference promotes dialogue concerning these issues while all parties are present rather than after a death — when most unplanned and emotionally stressful family conferences occur.
Some find it helpful to involve a facilitator, a trusted advisor to direct and mediate the discussion. Mom and Dad can explain their current estate plan. Together, the family can discuss amounts to be given to God’s work and even help select the ministries. In such a setting, children have the opportunity to express honest feelings regarding the amounts their parents are leaving to them. Avoiding these issues throughout life means more uncertainty, anxiety, and escalated conflict after the parents’ death.
Review your plan
Keep in mind that wealth-transfer plans represent a process. As circumstances, ministry opportunities, and tax laws change, and as you gain new information, you should review your plan. Experts recommend a review at least every three years. You may want to review sooner if you or your family have experienced significant changes.
