For personal advisors of many stripes, this question gets a fair amount of discussion. Sometimes it is framed in the context of determining the level of charitable transfers for an individual or couple, and other times it’s looked at from the perspective of what will impact a beneficiary negatively. And while it is a question that will get the level of attention it deserves, often it is wedged into a conversation about many other topics and does not receive the deep reflection it deserves.
Regardless of how the question is approached, however, it is important to look at the circumstances driving the answer dynamically. By that I mean that if you consider only how the children, for instance, might respond to a particular level of inheritance today you could get a very different answer than based on where they might be down the road. Certainly this multi-layered, multi-variable question is much more difficult to answer than one with just a few inputs — but asking and answering the right questions is crucial for achieving foundational personal goals.
Just recently the MAVEN spacecraft entered the Martian atmosphere. It took 10 months and 442 million miles to get there — even though earth’s orbit and Mars’ orbit are only 55 million or so miles apart (approximately eight times longer of a journey). The significantly longer voyage was necessary because, of course, the spacecraft needed to be aimed towards where Mars would be, not where it was. I’m not sure whether seeking an answer to the question for where a beneficiary might be as opposed to where he or she is requires eight times more thought — but I suspect that it might.
Here are a few thoughts as to how you might approach this question more dynamically:
- Consider whether the beneficiaries in question have additional room to grow.
- Consider whether your (or your client’s) present circumstances is clouding the answer if the gift is likely to occur in the future.
- Evaluate whether disappointment with a beneficiary’s personal progress or character is the chief driver for your answer.
- Make sure that someone else’s “rule of thumb” aren’t driving the answer.
- Consider whether you are willing to invest the time, energy, thoughts, prayers, etc., that might be required to give a more optimal answer than you would feel comfortable giving today.
Are there other thoughts you’d add to the list?