How to Share Your Wealth During Your Lifetime

Baby boomers are expected to transfer more than $50 trillion in wealth during the next 20 years, with much of it going to Gen X and millennial children. But many don’t want to wait until they die to help their heirs and charities. Here’s how you can share your wealth sooner.

That leaves those boomers with a difficult calculation. How can they provide financial assistance to family or charities without jeopardizing their retirement security, particularly when it comes to paying for long-term care.

The easiest solution to this dilemma is to postpone gifts to family members and charities until you die, when you’ll no longer need funds for living expenses or long-term care.

But holding on to your wealth until you draw your last breath has its downsides too. There’s a good chance you or your spouse will live into your 90s, which means your children will probably be in their 60s, or even 70s, when you die. That’s a long time to wait if they need money for a down payment on a home or are struggling to repay their student loans.

“Providing for heirs after life is wonderful, but if you help them while you are living, you get to see how your support impacts them,” says Abrin Berkemeyer, a certified financial planner in Houston.

Financial planners say that including “giving while living” in your estate plan provides a way to assist children and grandchildren in reaching important goals while allowing you to gauge how they’ll manage their inheritance. And making significant donations to a charity while you’re alive can help you to determine whether your money is being used wisely — and provide some valuable tax benefits as well.

The first step, though, is to figure out how much you can afford to give away.

One strategy is to create a timeline of your income and expenses in retirement, which will help determine how much you need to withdraw from your savings each year to pay for any expenses that you can’t cover with Social Security benefits, pension payments and other income sources.

It will also give you an idea of how much you can afford to give away. You may need professional guidance to get the most out of this strategy, because you’ll need to project your investment returns as well as taxes you’ll owe. A financial planner can help you avoid projecting overly optimistic investment returns or underestimating your taxes.

Estimating how much you’ll need for long-term care is difficult when you’re in your sixties, and financial planners use different scenarios to help their clients figure out how much they should save for that expense. Berkemeyer recommends saving enough to pay for three years of in-home care for eight hours a day. While many people assume they’ll end up in a nursing home, he says, they’re more likely to use in-home care.

Factors to consider when estimating how much you’ll need for long-term care include your health, family medical history, marital status and other sources of funds, such as long term care insurance. Home equity should also be part of the equation. Seniors often use proceeds from the sale of their homes to pay for care in an assisted-living facility or nursing home. If you prefer to age in place, you may be able to use a reverse mortgage to pay for in-home care.

Sandra Block is a senior editor at Kiplinger Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com.

©2024 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.

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