Giving Them A Portion of Their Inheritance Now Could Be More Impactful than All of It Later
There is a quiet shift happening among affluent retirees. After decades of saving, investing, and watching their portfolios compound, many are arriving at the realization that they are unlikely to live long enough to spend everything they have accumulated.
For some, that realization brings peace of mind. For others, it introduces a new and more nuanced question about the purpose of continuing to hold assets that will almost certainly outlive them.
The most obvious answer has long been to simply pass it down to the next generation in your will. But for families who have accumulated far more than they will realistically need, waiting longer may minimize the impact of that gift overall. In many cases, gifting adult children a portion of their inheritance now can be far more meaningful than transferring a larger sum to them later on.
One of the most underappreciated forces reshaping this conversation is longevity. Many Baby Boomers can reasonably expect to live another two or three decades. And statistically speaking, it is often individuals with higher net worths who have access to quality healthcare and preventative maintenance who enjoy that extended timeline.
If their children are currently in their 30s, 40s, or early 50s, then they could be in their 70s or 80s by the time the inheritance ultimately arrives—long after the money likely would matter most. Consider how impactful an additional $50,000 would be to you now compared to 30 years ago when you were presumably still working full-time, raising children, paying down a mortgage, and saving for college.
For many families who find themselves in this fortunate position, the answer is obvious. Three decades ago, that amount might have eliminated student loan debt, funded a down payment on a starter home, or accelerated retirement savings. Today, the same amount may simply be absorbed into a stable and established financial picture.
But beyond the math, emotions should also be considered. A living inheritance allows you to witness the impact of your generosity with your own eyes. For instance, you can see the home purchase happen and even enjoy family gatherings that you helped make possible.
Of course, one of the most common concerns parents raise is the fear of fostering entitlement. There is a deeply ingrained belief that struggle builds character and that insulating children from financial pressure may blunt their ambition. That concern is understandable, but it is often more about communication than about money itself.
Entitlement is rarely created by a well-framed, intentional gift. It is more often the byproduct of unclear expectations and poor messaging. A transfer positioned as a thoughtful, milestone-based decision—perhaps tied to a 50th birthday or the year parents formally retire—helps to reinforce this as a one-off rather than a long-term commitment.
There is also an uncomfortable reality that few families openly discuss. Some parents believe that allowing their children to struggle longer will make them more appreciative of their inheritance later. But the opposite outcome is also possible. Imagine adult children discovering in their 70s that their parents had accumulated substantial wealth decades earlier, which could have eased the stress of starting a family. Instead of gratitude, the late revelation may lead to resentment.
None of this is to suggest that retirees should recklessly bestow assets without regard for their own potential needs. Longevity risk, rising healthcare costs, and potential long-term care expenses must certainly be considered and planned for. The goal should be to regularly evaluate whether you have reached a stage where your wealth truly exceeds your lifetime spending needs by a wide margin and whether gifting a portion of that surplus now might create a greater overall impact on your financial legacy.
To subscribe to the MalcolmOnMoney newsletter and receive more content like this, click here.
*************************
Malcolm Ethridge is the Managing Partner at Capital Area Planning Group, based in Washington, D.C. His areas of expertise include retirement planning, investment portfolio development, tax planning, insurance, equity compensation and other executive benefits.
To subscribe to the MalcolmOnMoney newsletter and receive more content like this, click here.
Disclosures:
The information provided is for educational and informational purposes only, does not constitute investment advice, and should not be relied upon as such. Be sure to consult with your legal advisors before taking any action that could have tax and legal consequences.
Investments in securities and insurance products are:
NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE