Your Legacy and Your Children as a Retiree


In the past 50 years, the way Americans look at legacy giving has changed.  Generational views on inherited wealth are changing and questions about how much to leave children are being asked.

The Silent Generation

The parents of baby boomers, this generation lived through the Great Depression and World War II.  Because of this, they are excellent savers and have retired with defined-benefit pensions in addition to their other investments.  By hoarding investments, low spending, and almost no debt (especially credit card debt), this generation handed down large inheritances to their children.


Interestingly, the baby boomer generation seems to think in opposite terms from their parents.  This generation saw an era of protests against war, free love, and was the first generation to live in debt.  Some lived a lavish lifestyle, others endured careers in a damaged economy, while others went into debt to educate their children.  Whatever the reason, this generation has not saved nearly as much to pass on to their children, unlike their parents.

In fact, in a survey of baby boomers, 23% stated that they would like to spend their savings during their retirement years and leave nothing for their children.  Even those baby boomers with substantial wealth may end up leaving a large portion to charity instead of their kids.  But, there are some that still feel it is their duty to maximize family wealth and pass it on to the next generation.  Who is right?  Is there an answer to this question?

The Pros and Cons of Legacy Giving

Some people are driven to preserve a large legacy as they get older.  The obvious reason for this drive is self-driven—keeping enough money on hand against an unknown length of retirement.  However, some psychologists believe that there is a subconscious drive to remain relevant to their heirs as they age.  Finally, some believe that being remembered after death by the amount of money they left will keep them relevant.  Whatever the reasons, each person has their own drive for saving, investing, and giving.

On the other hand, those who don’t feel it is as important to leave a legacy state that they gave their children their inheritance in the form of educational expenses, loans during lean years, or that their children are also posting career and don’t need a large inheritance. Many parents in retirement also live long enough to see their children retire with their own investments.

Planning for an Inheritance

Some children expect an inheritance.  This can be a dangerous retirement plan.  In most instances, a good financial planner will not factor in an inheritance, unless the parents are so wealthy that they could never use up their assets in their lifetime.  Since most people do not fall into this lucky category, they should not rely on an inheritance, but rather plan their own retirement based on their own investments.

This still doesn’t stop almost 20% of Americans from banking on some type of inheritance to help fund most of their retirement, while half are counting on an inheritance to help provide them will some monetary support in later years.  But what if the unexpected happens?  A person should never count on inheritance income for essential living needs like food, housing, or health care.  

Preserving an Inheritance

Some entering retirement has already received an inheritance.  The question then becomes what to do with that money.  Should it be left intact for the next generation?  Should some be allotted to long-term care expenses?  Should the principal be left to future generations, while the interest is spent?

Factors such as inflation, investing choices, and an individual’s life span are complicated issues that must be addressed.  For that intent on not consuming any of the inheritance, the choice is simple.  Put the inherited money into a separate account, designate beneficiaries, and then simply pass on the entire balance at death.  However, if assets from inheritance are mixed with an individual’s assets, extra planning with regards to the exact amount to leave as a legacy is required.

Warren Buffet said it best when he advised leaving children, “enough money so that they would feel they could do anything, but not so much that they could do nothing.”

Balancing Act

Having a direct line of communication within a family about goals and needs is the best way to being in family estate planning.  However, leaving a legacy doesn’t mean that a person has to wait until they die to give their children money.  To avoid paying estate taxes, many people in a financial position to do so gift some of their money earlier in life for a child or grandchild’s needs such as education, housing, or health needs.  Currently, the amount that can be gifted annually with no taxes or even paperwork is $14,000.

Leaving a modest amount of money to a child or children can help them with financial stability.  However, leaving too much, or giving it too early, can lead to a life of instability and recklessness.  On the other hand, receiving an inheritance should never be seen as dedicated income for use in retirement.  It should always be seen as a possible addition to income, but never as the main source.

With so many different personal aspects of legacy giving, each one is a process unto itself.  But one thing is certain:  Those looking to leave a legacy to their heirs must think about the effect that their legacy will leave on those left behind because the amount and way that the inheritance is left can affect generations to come.       

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