The Holiday season is here. Many of us are looking for the perfect gift for family and friends. It is sometimes difficult to know what your spouse, child or friend will appreciate receiving. We spend a lot of time thinking about these gifts. More often than not, more thought and care goes into seasonal and occasion gifts than goes into monetary gifts made during life or after death. Typically, the latter type of gift could be better described as a transfer, rather than a gift. They are more often focused on the quantity, rather than the quality, of the gift. These transfers are not necessarily reflective of any goal other than to maximize the monetary value of the transfer. There is nothing inherently wrong with such transfers. But why not put the same care into the transfers we make at death that we do when making occasion gifts?
90% of wealth fails to transfer to the 3rd generation. And 50% of wealth is used within 18 months of receipt. The most common reason for this is a lack of communication and trust. The second most common reason is unprepared beneficiaries. Poor financial and estate planning only accounts for 3% of failures. Wills and trusts and other forms of estate planning, prepare assets for beneficiaries. But what are we doing to prepare our beneficiaries for the assets?
Money, politics and religion are topics we commonly avoid. And it can be difficult to talk about money. It stirs up emotion-charged subjects: identity, power, purpose, control, and legacy, to name a few. Although avoiding the money conversation can give short term comfort, it can end in missed opportunities or worse, disaster, with the family destroyed by money.
The Jewish philosopher Maimonides described eight levels of giving. For Maimonides, the lowest level of gift is the grudging or reluctant gift, while the highest level of gift may not involve a monetary transfer at all: it may be a loan, the creation of a partnership, or finding employment for a person in order to strengthen his or her hand until he or she is no longer dependent on others. While this may not be consistent with everyone’s thinking, it does help with this question: what is the purpose of my gift? Perhaps it can help us move beyond simple transfers which frequently result in subsidies, to gifts with a purpose, gifts designed to enhance the recipient’s life—and ultimately, perhaps, give the recipient freedom.
Our own money story drives many of our decisions, often unconsciously. It needs to be addressed when contemplating gifting—especially gifts we plan to make at death.
- What is your money story?
- What is the purpose of money for you?
- What do you hope your gifts will add to recipients’ lives
Thinking about these questions and talking with your beneficiaries about your goals and their goals can go a long way to increasing the value of a transfer, and perhaps transform it into a meaningful and even mindful gift that supports the recipient’s and his or her family’s well-being for years to come.