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Estate Planning – Where is Your Money Going?

I’m not sure if it’s a recent hot topic, or if it’s because my mind has been on it, but estate planning and inheritance seem to be popping up all over the personal finance landscape (see Canadian Capitalist guest post).

While our current wealth is modest, I imagine that the more time our investments have to grow, the greater our net worth will be.  Our retirement goal, like many others,  is to have an investment portfolio that produces enough income to meet our planned retirement expenses.

However, with our frugal mindset, it is difficult to imagine spending the capital base of our investments.  It is likely that we’ll end up living off  distributions (dividends/interest) keeping the capital in tact.  If we are fortunate enough to live into our 80’s or 90’s, we could possibly have a net worth of several million dollars upon passing.

So what are we supposed to do with all that cash?  What is our estate plan?

The way I see it, the obvious options are:

  • Give 100% of the money to our kids upon passing;
  • Give no money to the kids, but all to charity;
  • Give some money to the kids while we’re alive, rest to charity upon passing.

The problem with giving 100% of the money to the kids, especially if it’s a large amount,  is that it may take away some of their ambition and  drive to succeed on their own.  Similar to expectations for myself,  I want my kids to get their own education, own careers and have ambitious life goals.  Having millions of dollars simply gifted to them would likely take away some of that (depending on their life stage).

The second option is to leave 100% of the estate to charity. I can’t see this option being very popular with my kids, but it would give them the expectation that they need to fend for themselves and hopefully keep them hungry for more out of life.

The most appealing option is to give the kids some money while they are alive when they really need it, like for a down payment on their first house, higher education, seed capital for their business,  or maybe private school for the grand kids.  The gift would be with the expectation that upon passing, the remaining estate will go toward charity.  I’m partial to this solution as we would get to enjoy giving the gift while we are alive and it provides some financial help where it’s really needed (hopefully) without damage.

As everybody’s situation is unique, I’m interested in hearing what you plan to do with your estate.  Do you plan to spend it all while you are alive?  Or leave a large portion to your heirs?  Or maybe a hybrid of the two?

23 Comments


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