For generations, the traditional approach to inheritance was fairly straightforward: parents accumulated wealth throughout their lives and passed what remained to their children after they died. Increasingly, families are considering a different approach. If you’re financially secure and expect to leave money to your children someday, does it make sense to give some of it to them earlier?
There can be compelling reasons to do so. Giving during your lifetime can allow your wealth to have an impact when your children may need it most, while also giving you the opportunity to see the difference it makes.
The Value of Giving Earlier
If you live into your 90s and your children are 25 or 30 years younger than you, they could be in their 60s by the time they receive a traditional inheritance. By then, they may already own their home, have finished paying for their children’s education and be approaching retirement themselves.
The same dollars could have a much greater impact when they’re 35 or 45 and facing some of life’s biggest expenses. Helping with a down payment could allow them to buy a home sooner or take on a smaller mortgage. Paying down student loans could free up money to save for retirement, while helping with childcare or education expenses could provide some breathing room during years when a family’s budget is stretched in several directions.
This doesn’t necessarily mean giving away more of your wealth. Instead, it means thinking about timing and whether moving some of a future inheritance forward could make those dollars more useful.
Seeing the Impact Firsthand
Giving during your lifetime also offers something a traditional inheritance can’t: the opportunity to experience what your generosity makes possible.
You might watch your children move into their first home, help a grandchild graduate with less debt or give a child the financial flexibility to start a business. Your support could also create experiences for the entire family, such as paying for a vacation or renting a house where several generations can spend time together.
The benefit doesn’t always have to be attached to a major milestone. Sometimes helping with a significant expense can simply reduce financial pressure during a demanding stage of life. For some families, that makes sharing wealth part of the experience of having it, rather than something that occurs only after a parent’s death.
Protect Your Own Financial Security
Of course, there’s an important difference between having significant assets and having assets you can comfortably afford to give away. Retirement can last decades, and markets, healthcare costs and unexpected expenses can all change your financial picture. A gift that seems easily affordable today should still be considered in the context of your long-term retirement income, liquidity and ability to maintain your independence.
How you give can matter as well. Cash, investments, real estate and other assets can have different tax and estate-planning implications depending on your circumstances and where you live. Significant gifts should therefore be considered as part of your broader financial and estate plan, ideally with input from your financial, tax and legal professionals.
Decide What You Want Your Wealth to Accomplish
Ultimately, the question isn’t simply when you should give your children their inheritance. It’s what you want your wealth to accomplish for you and your family.
If your primary goal is to preserve as much wealth as possible for future generations, waiting may make sense. But if you want your money to help your family at moments when it can have a greater impact, giving some of it earlier may be worth considering.
For many families, the answer won’t be giving everything now or waiting to give everything later. It may be finding a balance that allows you to maintain your own financial security, help the people you care about when the opportunity arises and still preserve a meaningful legacy for the future.