Personal Inheritance -- Giving -- April 28, 2024

Locator: 47089PERSONALINVESTING.

I'm starting a new series on investing that I can share with my extended family members, most of whom have Schwab accounts but little understanding about investing.

This information is based on lessons learned during thirty-plus years of investing and saving for retirement. This information supplements, does not replace personal reading, research, and professional advice.

Anything I write here is meant only for my extended family members and no other readers. It is a starting point for discussion among the family members. Nothing is written in stone. These posts will be updated as conditions change. They will eventually be collected and linked under the "Personal Investing" tab at the top of the blog. 

This is meant for extended family members who:

• are not retired:
• report less than $250,00.01 annually in earned income to the IRS
• have limited investing experience

This information holds true for the extended family member who has a financial advisor (paid or otherwise).

Likewise, kids or no kids, it does not matter.

Purpose of this series:

• start the conversation
• work out the process of intergenerational wealth transfer
• set up investment, retirement, educational accounts
• begin transfer of funds to these accounts
• review the history of / the evolution of investments that occurred over the past 30 years
• "to know where you are going, one needs to know what you've been"

Starting early could give heirs several years of financial education before they have to handle their inheritance on their own.

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When to Start The Process
Of Passing Wealth To Heirs

Binary:

• start transferring wealth as early as possible;
• transfer wealth after death

Pros and cons discussed with heirs.

The family elected to begin the process as early as possible.

• con: ultimate inheritance may be less, but not necessarily
• pro: heirs will have opportunity to learn about wealth management

Timing:

• for us, there was almost a "natural" age when to begin the process: the age at which RMDs were required by the IRS

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The Process

Amount to be distributed. At a minimum:

• 30% of all RMDs set aside for taxes
• 70% of all RMDs distributed to adult children and to all grandchildren
• to adult children: max out IRAs, 401(k)s of adult children
• for all children, fund 529s to extent necessary to cover anticipated college expenses

Timing:

• begin the process as soon as RMDs are required; as soon as RMDs are taken
• assist adult children in establishing Schwab accounts if they have not yet done that
• through Schwab, fund heirs' retirement accounts and 529s