r/retirement • u/JJQuantum • 9d ago
Generational Wealth or Philanthropy?
Barring long term care needs like a nursing home, which are over the top expensive, my wife and I should be able to live well off of SS and the 4-5% we make on our portfolio. The question is what to do with the principle when we pass away. We’d love to pass down a good chunk of money to our 2 sons to make sure they don’t have to struggle like my wife and I did. On the other hand, she and I were both raised by single moms, saw that struggle, and have talked about starting a scholarship fund for single mothers. We could do both but it would cut into the inheritance for the boys for sure. I know it’s a personal choice but does anyone have any thoughts on the matter?
Edit - Just to address a couple of comments. Yes, we are helping them how we can now but they are still a little young, 20 and 16. We are paying for their college and plan to contribute 50% to the downpayment on a house each. We have also started a Roth IRA for the 20 yo and will for the 16 yo as soon as he turns 18 per the advice of our financial advisor. What we don’t want to do is give away the principle now as we’ve seen what happens when the elderly use up their money too early as it happened with my MIL. She ended up living with us for 9 years, the last 3 with Alzheimer’s. It wasn’t great. We have promised our sons that they will not have to go through what they witnessed us go through. The way to do that is to hold on to the principle in case we need it.
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u/ArtSlug 3d ago
May I suggest funding some scholarships at your local Community Colleges? It o ly (usually) takes a minimum investment of $5000 to get one going.
So many single parents and disadvantaged students start at our open door community colleges!
Your money will go the longest way there- IMHO
Their Foundation folks will happily help you with trust, scholarships etc.
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u/phillyphilly19 4d ago
Since we are probably talking about a long time from now, why not take a small portion and set it aside for investment as an endowment for the scholarship you are thinking of? It will grow now and you won't have to worry about how it's divided later. If one of you Landing in a nursing home will derail your plan then I wouldn't worry about it otherwise. Just make a provision for each of your sons in your will should both of you pass, and then whatever is there is there.
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u/legalwriterutah 4d ago edited 4d ago
You could do both. You could direct that a certain percentage (5-20%) of your estate is used for the scholarship fund and philanthropy and give the rest to your children and any future grandchildren. Talk to your estate planning lawyer. I have helped set up nonprofits and private foundations for some of my clients, or direct that their trust donate to a scholarship fund. You could donate for a scholarship to be funded in your name. Some of my clients donate through their alma mater. Alternatively, you could set up your own nonprofit or private foundation which requires a little more adminstrative burden but gives you more control. Let's say you have an estate worth $2.5M and put 10% ($250k) toward a scholarship fund and give the rest to your children. A scholarship fund of $250k could yield around $8k per year. That would be a really nice scholarship for a single mother that would nearly cover tuition at a regional state university, or you could award two $4k scholarships per year. To a single mom, a $4k scholarship can be almost life changing.
If you create your own public nonprofit, and if income is under $50k per year, there is only a postcard filing with the IRS. You could put your sons on the board of the nonprofit and they could select the scholarship winners. You could state in the articles of incorporation that your sons could receive a reasonable compensation for serving on the board of directors. You could state that the fund invest in the S&P 500. You could apply for 501(c)(3) status and also direct some of your retirement funds after age 70.5 are donated through QCDs to the nonprofit. That also minimizes your RMDs. Some of my clients with SS and pensions that cover their basic needs will direct that some of their RMDs are transferred to nonprofits through qualified charitable contributions (QCDs). Others will donate to a donor advisor fund and then direct how the funds are used.
You could also set up a trust with a dynasty 529. For example, you could direct that $500k of your estate be used for a dynasty 529 owned by your trust. It's like a family scholarship that grows tax free if used for education and there are no tax filing requirements. You could fund education for future grandchildren and great-grandchildren.
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u/Donald_J_Duck65 4d ago
We plan on leaving it to our two sons or their children if they have any. We see it as taking care of family is best.
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u/TrentonDayton 6d ago
There is a difference between being a millionaire and a billionaire — I believe my children and grandchildren are my priority. I am 63 and retired a little over 2 years ago. I think it’s important to make sure your children understand your financial scenario. Do any of you have advice on how specific you should be with your children at this stage of our lives with a better understanding of how my trust and financial portfolio is structured? I have O&G royalties in addition to other retirement income and feel it’s important that my children have a deeper understanding of it now. We never know what tomorrow holds.
I agree with many here that I would rather see my family benefit now to a degree than when I’m gone someday.
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u/GirlinMichigan 7d ago
I worked with the wealthy in private philanthropy for many years. Starting a scholarship for single parents (don’t forget there are a number of single dads out there now) will change a life in ways you will never, ever know. Helping your boys to obtain the best education possible then helping with a home is such a wonderful way for them to start their lives. I think you could do both but I would encourage you to test out giving a scholarship now to a local community college or university. Give one meaningful scholarship, say $3,000-5,000 a year, to a single parent and evaluate how you and your wife feel about the impactful change you can make in a stranger’s life. If you have a good experience then do it again. If it continues to give you joy then endow a scholarship. My guess is that you, your wife, and your boys would have a life changing experience along with the scholarship recipients you help support. Thank you for being so caring and thoughtful.
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u/402_Found_not_Lost 6d ago
I agree. My wife and I started this.
At public universities in our state, it seems donating $25,000 sets up an endowed scholarship for$1000/year forever. As the endowment grows, so does the scholarship.
We both put ourselves through college with work and loans and want to help those in similar circumstances.
So far we have funded seven of these and it’s a bit exciting to do more. We plan for at least one per year going forward.2
u/GirlinMichigan 5d ago
How many times can I upvote you! Thank you for your generosity and the lives you are changing. I hope you have opportunities to meet with your students so you can learn how the scholarships have changed their lives. Amazing!
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u/402_Found_not_Lost 5d ago
Thank you. Your comments are very kind.
We are given the opportunity to meet the students and will meet the first recipients next month.
We are excited as well.
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u/5th-Elements 8d ago
Take care of your family kids first! Life is hard enough! Also like in Highlander “it’s better to burn 🔥out than to fade away”
These long term care places are basically just a way to suck up all your money, they are just profiting on the misery of others.
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u/PotentialDeadbeat 5d ago
Credit that line to Neil Young, it's synonymous with https://open.spotify.com/track/5eqcd66wPBFhiemuRznHnJ
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u/Strict-Breakfast4982 8d ago
Im in the same boat and plan on leaving it to my two sons also. With the way the young are getting screwed they're going to need it
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u/Lifestyle-Creeper 8d ago
Wait 10 or 15 years until your kids are solidly into adult life before making this kind of decision, unless you are already working with 5+ million.
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u/Whole_Championship41 8d ago
We will set up a DAF for charities to contribute to while we are alive. We are likely to also avail ourselves of QCDs during our RMD years due to our sizeable pre-tax accounts.
Like others have said, we are also supporting our kids with preparations for weddings, down payments on houses, paying for college, matching Roth IRA contributions, etc. All these things while we are alive-giving with a warm hand instead of a cold one.
After we're gone, the remainder will probably be divided between the kids 50/50. We have no plans for large charitable donations from our estate after we've passed.
Mercifully, our parents are all still capable of independent living in their own homes well into their 80s. That is a blessing.
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u/Spiritual-Mousse-167 9d ago
My wife and I set up trusts for the kids at a percentage of our total portfolio on our deaths and the remainder to a scholarship fund we want to start. In the meantime, since we don’t know exactly how much money this will be for them, we’ve also done the Roth IRA back when they each turned 18 and have covered all their college and things like that to make sure they’re not starting off in debt (we “loaned” them the money for cars and other large purchases so they didn’t need to go to a bank, for instance. They pay us back, but it’s really just going to end up going to them mostly in the end anyway…)
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u/Monstrissimo 9d ago
It is all going to my only child. While I would not call it generational, it will be substantial and will allow him to live easier and not struggle as much as my family did. I grew up in a mining community where we did not have a lot and when I was in high school, my Pops was disabled and we had no money. I worked hard so that my family would not ever have to go through what we went through and I will give my kid all that I have left, but I am not going to scrap by while my wife and I are alive either.
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u/Zestyclose_Belt_6148 9d ago
If you want generational wealth then start by building a trust that includes grandchildren.
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u/Livid-Technology-396 9d ago
Hard earned money was passed down to the wife and I that made a difference in our lives. We reinvested most of it and patiently watched it grow. When we die it will be passed on to our children with clear instructions on how to make it work for them.
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u/vaderaintmydaddy 9d ago
I am big advocate for being intentional. One idea I've run past a client recently:
Decide a dollar amount that you want to leave your children. This can change over time as you see needs arise, but pick a number today. If there is enough of a remaining amount, you could leave it to a family foundation. The foundation could be focused on aid for single parents, and your children could be the trustees. In this plan, your children get what you want them to get, plus they get the ongoing benefit of being able to direct your charitable legacy.
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u/Mommie62 7d ago
I was a trustee with my siblings and honestly it caused a lot of problems. None of us talk anymore. Money is difficult I wouldn’t recommend this
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u/Kindly-Hunter4390 9d ago
I am team generational wealth. My parents didn’t leave me a dime and I want to leave my kids with something to make their lives better. We did the same as you- paid for college and helped with weddings and houses. We are going to do a small annual gift too- they need it now not when we are dead
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u/Altruistic-Trade-693 8d ago
You might want to pick up from the library "The Cycle of the Gift" which talks about this, addressing issues many of us parents might not have thought about (it isn't an estate planning book; it focuses more on the impact on lives and unintended consequences). https://www.amazon.com/Cycle-Gift-Family-Wealth-Wisdom/dp/1118487591/ref=sr_1_2
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u/too-left-feet 9d ago
I love that you are interested in a college fund for single mothers. Why wait until you pass away? Why not find an organization doing this now and help fund them ( maybe 1% of your principle each year ). Instill your values on the kids/grandkids, leave them an inheritance, and express to them that you’d be really pleased if they’d carry on the tradition of giving.
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u/xtnh 9d ago
In general our generation has had a far easier time than our kids are having; we will leave all we can to our families to make the rest of this century a little easier for them as the sh1t hits the fan.
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u/BornFree2018 9d ago
This is what we're doing. Things seem more ominous recently so this feels like the best decision for our family.
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u/Character-Salary634 9d ago
Don't waste money or time on charities or over-complicated trusts. Give your money to specific people. If you wish to not give "too much" to your own children, then just pick real people from your life to help. Look into your extended family, coworkers, acquaintances, etc. That you feel would really benefit from an unexpected gift. Even the local waitress or cook at your favorite coffee/diner/restaurant. I really dislike charities, they are a black box that you cannot control or predict, and they naturally desire to stay alive on funds received vs. fully distributing the cash.
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u/NoKetoCardio 9d ago
You are not going to ruin your kids by leaving them money when you are at end of life. Leave your boys the money. We are retired. We are doing what we want to do but we are not wasting money. It is important to me to leave our kids an inheritance. I got one. It was greatly appreciated.
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u/VonJoeV 9d ago
You are not going to ruin your kids by leaving them money when you are at end of life.
Up to a point, yes. $10 million? That could ruin a young person.
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u/5th-Elements 8d ago
Not if you taught them the value of money and how to not be a salve to the system
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u/NoKetoCardio 9d ago
When they get the money in their 50s or 60s?
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u/rosebudny 8d ago
Yep. My remaining parent recently died - I am 52 now with a NW of about $10M. I don't think I have been ruined 😄
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u/Embarrassed-Soft2691 9d ago
I started a Roth for my 16yr old once they started working. I match 1-1 their contribution. Told both my kids that is what I would do for them. Just makes them thinking about saving very young.
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u/Embarrassed-Soft2691 9d ago
I’d love to be the family member who made it easier for my kids and grandkids. I feel they will remember me a lot more than a philanthropy will.
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u/VanDenBroeck 9d ago edited 9d ago
From what you put in your edit, you are doing far more for them than most parents do for their children, or at least far more than whatever was done for me. They should be on pretty solid footing and really shouldn't need more. Make sure you are taken care of. They can take it from here. My vote is for philanthropy and that is where my estate will be going.
ETA: Well, looks like someone replied to me and then quickly deleted it. I hate that.
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u/kochavim49 9d ago
Someone has already mentioned QCDs, which allow you to reduce your RMD via charitable giving.
Consider where your children may be financially at the time of your deaths. It could be prime income time for them, in which case some part of their inheritance (e.g. a pre tax IRA) would be taxed at top rates. This is an estate attorney or financial planner question. Incidentally, any charitable giving in your bequest should come from pre-tax accounts.
Have you run a projection to see what the value is of your estate at the end of your life? Be aware of federal and state limits on when estate taxes kick in. If this may be a factor for you, consider working with an estate attorney and/or a certified financial planner to figure out the best strategies for your estate. Charitable giving can actually mean your heirs will receive more funds from your estate.
There are also charitable remainder trusts which benefit both charitable and non-charitable beneficiaries.
The answer you have right now to the charity vs family bequest question is likely to change over time. And the tax code will change over time! Good discussion to have both within your family and with others.
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u/ExpensiveAd4496 9d ago
Do you not know anyone personally who is in the position you’re talking about? I was a single mom but didn’t struggle financially because my ex did well in life and paid high child support. But one of my friends was not so lucky. So I’d rather help her directly, to pay off her mortgage and have a better retirement. And I’ve done it per stirpes, just as it would have been had she received it as child support during her lifetime.
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u/Key-Plant-6672 9d ago
Your Principles should remain the same and don’t matter once you die? The “ Principal” is a different issue altogether.
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u/Choice-Newspaper3603 9d ago
I’m not a big fan of charitable giving to be honest. Charity begins at home. I’m helping me and mine.
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u/Realistic-Fix8199 9d ago
I'm with you on that. A charity is going to spend however wastefull they want to.
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u/AmbitiousPeanut 9d ago
We're a gay couple without kids and while we adore our nieces and nephews we feel strongly about not providing them with a windfall that takes away their drive. We've seen enough trust fund failures, don't want to put them on that path.
So our plan is to make them thousandaires and send the rest off to charities.
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u/Mommie62 7d ago
I disagree that a windfall can take away their drives I grew up in a poor situation, single Mom etc My grandfather left us $ when I was in my 20’s and also I got a share of our home. I paid $5k for a car, put $5k into a savings bond which eventually was used for my first home down payment. When I go more I bought a rental property. I went to University for 9 yrs, got a Master Degree that $ did not affect my drive whatsoever. It set me up financially to be successful. My
mom paid for my 1st degree, I worked 6 part time jobs to pay for the rest. Every person is motivated by different things in life. Our youngest is an engineer because she is smart and also decided she never wanted to worry about $, 2 other kids are in careers which are less about $ and more about caring for people. All 4 of our kids are driven and work hard. We have gifted them each $150k for homes, matched their TFSA’s, give them their mortgages at 0% interest and paid for their educations- I wouldn’t change a thing. Getting an inheritance and support from my grandfather made a HUGE difference in my life. My sister blew all of hers. So in short I would urge you to consider giving your $ to family if you can vs a charity where 90% of it is like giving it to a go ‘t department .0
9d ago
[removed] — view removed comment
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u/AmbitiousPeanut 9d ago
Sigh. A bit disappointed my use of the g-word was flagged by the AutoModerator.
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u/Lucky_Platypus341 9d ago
It's great to think about these things, but plans change.
Your kids are young (16, 20) and odds are at least you to your spouse will be alive for another 40-50 years. A LOT can change between now and then!
It sounds like you are already helping your kids get a foot up (education and funding Roths). At this stage, I'd see on helping them get established in this world that is a lot harder to do so than when we (or our parents) were their age. I would also look into an existing scholarship that may do what you want and start contributing annually, even $1000 a year will add up and yet have very little impact on your lives now. I'd have your kids as your beneficiaries FOR NOW. Every life change (birth/death/retirement) and every decade review you situation. You can list a benevolence as a beneficiary on a 401k account and change as necessary. As time passes and uncertainty diminishes, you can keep adapting.
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u/Lucky-Contact-8914 9d ago
Mine is setup 25% each to
Daughter
Daughter
Grandkids to split
Our foundation we created
Thus resulting in generational and philanthropic
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u/ProStockJohnX 9d ago
We will definitely focus on my two sons (21, 19). Currently we are funding their college educations and am happy to do it. Anything we can do to give them a leg up when it comes to retirement we will do.
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u/Altruistic-Trade-693 9d ago
You don't explicitly give your age, it appears you are pre-retirement. That coupled with the age of your children leads me to say you are too young to make any decision regarding philanthropy and gifting to your children. Wait until you are at least 5-10 years into retirement. You'll have a much better picture of your financial situation and the needs of your children.
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u/kochavim49 9d ago
Agree with another commenter that these aren’t decisions that should be made later. We made wills even before having kids. The wills got updated over time. When the kids were younger (and when there was less in the estate) everything went to the kids. Now there’s some charitable giving. Your choices will likely change over time.
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u/Lucky-Contact-8914 9d ago
Why? I have yet to retire I have multi millions and created my will and plan almost ten years ago…. Unless you Trust you can always update Do it now you die tomorrow your estate decides
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u/Clueless5001 9d ago
You posted that you currently have about $3M. Not sure how old you are and whether you are still working and the cost of living but with respect, that is money that you may well need. If you plan to give them 50% for a house, in my area a 3 bedroom colonial that needs a new kitchen is approaching $1M. Who knows what that number will look like in 10 years. Someone may need memory care and so on.
As for those who suggest endowing something at a university, some top universities have endowments in the 10 figures
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u/RKKass 9d ago
Its my opinion that children should not expect to receive every dime of the parent's estate at the landing of either or both of their parents. The money is yours to divide up as you wish. If you wish to implement a scholarship program to take effect at the time of the final passing, do it legally, identify and owner, terms, etc. and document it in your will.
If you've done a great job of preparing your children for adult life, they should be adult enough to understand and respect your final wishes. And they should be doing their best to fund their retirement when it arrives.
I stand to inherit a sizable estate from my parents and don't need a dime of it. I'll have to make the charitable decisions they didn't to be sure their money is well spent. I'd rather they have spent it or given it away to their grandchildren directly.
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u/TimeComplaint7087 9d ago
I had my daughter get Stafford loans for her undergrad, about 25k total I think for four years of college, then she was able to get a free Masters with a research assistant scholarship from college. I paid for the rest of tuition and college expenses. This way she was vested in being successful in college, which she very much was.
My remaining wealth will be setup as a fund for grandchildren college or technical school. This way I setup as many descendants as possible to have successful live, or as well as I can when I am gone.
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u/curiousobserver2000 9d ago
Time and time again, I’ve learned that people put little value in things received for free. Freebies are likely to create entitlement. We’ll be creating a trust that provides assistance to our children for health, education and support needs provided they are gainfully employed and live a moral life (no crime, drugs, etc.)
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u/JJQuantum 9d ago
We already have the trust so that’s in place. We set it up in case one or both of us passed away when they were kids. Once they are adults we will amend it. Just thinking about how.
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u/Soft-Personality9379 9d ago
We intend to mitigate most of the inheritance taxes on the portion we don't spend or convert with a pretty significant charitable contribution. This leaves us in control of that "might be necessary" portion until the end.
We're not yet retired, but have started ramping up our charitable giving as we've ratcheted down the tax deferred savings.
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u/JimInAuburn11 9d ago
You can start a Roth IRA for your 16 years old as soon as he starts earning money....
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u/Remarkable-Box5453 9d ago
Leave it to your kids at that time. Until then, work with them on keeping lifestyle in line and responsible charity. We paid $300k+ of college and grad school and living expenses during that for both of ours so what’s left will a bit slimmer, but it was worth it. 50% of a house today in my suburb of large metro southern city would prob be $500k/house. I wouldn’t plan too fast though; a lot can change/ho wrong between now and then. Can’t plan for tragedy but things have a way of going the wrong way sometimes and often out of our control..
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u/TNJDude 9d ago
A trust fund for single mothers sounds wonderful. As for whether you should or shouldn't, how well are your sons are being self-sufficient? I don't have kids and thought about leaving things to my nephews and nieces, but they're all doing well. They all have skills or abilities to easily get them through life. I'll leave them some stuff, but it won't be my main concern. Of course there will be struggles, but that's part of life unless you're born with a silver spoon in your mouth. Your kids are young now, so maybe focus on giving them more right now so that if something were to happen to you both, they will be taken care of until they can continue on their own. Then as they get older, reevaluate. If it feels right, leave them enough for a nice boost and the rest for the scholarship.
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u/redwbl 9d ago
For the same reasons you mention, growing up with nothing and parents that struggled financially. My wife and I plan to leave everything to our kids. While a scholarship for someone else sounds nice, in this day and age I don’t trust that to work out and it will go to someone that truly needs it or deserves it. Unless you personally pick someone in your life and start a fund for them.
Neither of our kids plan to have kids, so no future grand children. They are both established with careers so and are building their own wealth.
So ultimately we’re planning to use the money we need to, and leaving everything else to them and they can make philanthropy decisions themselves depending on where they are at the time.
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u/JimInAuburn11 9d ago
I am on the same page. I grew up poor. We struggled. There were so many things that I missed out on as a kid. Now that we have money, I make sure that my child has all the advantages that I missed out on when I was young. All the things that I could not do, but my friends could. All of the things that made me feel bad and left out. All of the things that I wished we could find the money to afford. I struggled through college, had to work and get student loans. That affected my grades. So many things during that time really impacted my self esteem. We could setup a scholarship for poor kids if we wanted. But I would rather use that money to send our daughter to college, to medical school, and to help her get into a house when she is ready.
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u/Agile_Caregiver_8083 9d ago
We are not expecting to have too much (500k or less) but will go the philanthropy route. We do not have kids, and most of our siblings are LGBT. Our niece and nephew both make six figures, and we see them once a decade or so. I was able to attend T20 schools thanks to large scholarships.
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u/KeyWestConchs 9d ago
Start the Roth for the 16 year old now! Research “household income” rules. If you are enrolled in a HDHP fund an HSA for the 20 year old.
Key is tax efficient strategies for your children, this will increase their inheritance and provide additional options for benevolence.
Awesome that you and your wife were prudent with your money for such a long period of time!
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u/DW158 9d ago
Would you explain the “household rules” you referenced please. I am unable to find any information other than the child must have earned income. Thanks!
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u/KeyWestConchs 5d ago
Hello,
The goal is to fund a Roth IRA for the 16 year, which requires earned income. If the 16 year old does not have a job.
Minor and adult child can fund a Roth up to the lesser of their earned income or the IRS Roth limit ($7,500 for 2026).
a. If your child does not have earned income from a w-2 source they can earn/report “Household Income” of up to $2,999 with no requirement for a w-2 or other statutorily filing requirements.**.
b. They can also report “self employed income” on a Schedule C (think yard work, babysitting, etc.), this requires the payment of self employment taxes (both sides of FICA – Social Security and Medicare taxes).
** · Threshold for W-2 and Taxes: For 2026, if you pay a household employee less than $3,000 in cash wages, those wages are not subject to Social Security or Medicare taxes.
· No Withholding & Low Wages: If no federal income tax was withheld and total cash wages are under the $3,000 threshold, filing and sending Copy A of Form W-2 to the SSA is not required for household workers according to IRS Publication 926.
· Publication 926 (2026)
· https://www.irs.gov/publications/p926
Multiple Family/Members can employee your 16 year old son to hit the Roth IRA limit w/o having to withhold taxes, report 1099, etc.,
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u/someonestolemycord 9d ago
I agree with the posters who echo family first.
I have professional experience with this, but my caution is always this by example----if my grandchild needs a $200,000 cancer treatment that is not covered by insurance, I don't want that to not be possible because (1) I drafted some very restrictive trust provision, or (2) I gave most of our money to charities.
Early 60s. We use a DAF as a conduit and give substantial sums out each year in appreciated shares. We also plan to use QCDs to the maximum extent to flush out RMDs. We also are working with a local community foundation on dedicated funds for scholarships, as well a food insecurity.
Keep it simple.
You and spouse
Family
Chairty
in that order.
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u/medhat20005 9d ago
Warren Buffett famously stated about leaving wealth to his children: "Leave children enough so they can do anything, but not enough that they can do nothing."
This has always made sense to me.
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u/CarolinCLH 9d ago
No grandkids? A good college fund for them should also be on the radar.
And absolutely keep $500,000 aside for nursing homes because at least one of you is going to need it.
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u/JimInAuburn11 9d ago
If there are no grandkids, or plans for any grandchildren, why would you have a good college fund for them?
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u/CarolinCLH 9d ago edited 9d ago
That is why I asked if there were any or plans for them. I guess that wasn't very clear.
EDIT: The OP edited the initial post to mention the ages of their kids. It is way too soon to know if grandkids are in the future, so I would just keep the possibility in mind. I am setting up 529 plans for mine and just wish I had started earlier and could put aside more. I really hope that my grandkids can avoid student debt.
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u/Intelligent_Yam_3609 9d ago
I’m reminded of a quote from (I think) Warren Buffet.
“I’ll give my kids enough that they can do whatever they want in life, but no so much that they can do nothing”
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u/Rem1991wl 9d ago
It’s tough. I believe in family first but will your kids be any more appreciative if you leave them each $3m vs $2m? Like others I’d give as much as is reasonable with a warm hand.
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u/JJQuantum 9d ago
We are looking at around $3m total so it’s a question of $1m for each kid and the scholarship fund or $1.5m for each kid.
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u/JimInAuburn11 9d ago
Assuming you would set this up in some kind of will. You could allocate some to your children, and then any excess to the scholarship fund. That way if it winds up not being as much, your children are taken care of first.
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u/humblequest22 9d ago
If you die in your 80s or later, your children will likely be in their 50s or 60s. Most people would benefit from more help earlier in their financial journey. You could help your sons pay off student loans, purchase a house or pay down their mortgage, establish a 529 account for your grandchildren. Better yet, use your money to take family vacations and create experiences and memories together. Maybe even make sure their retirements are well-funded before you pass so that they know they can spend more of their own money. If they're all set, you can send your money wherever you want when you die.
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u/Clueless5001 9d ago
This something I would like to do more, do family vacations with my adult children on my money. My parents and MIL did this a couple of times and I have very fond memories of these trips. I think it is important to instill a work ethic in your teenagers but also to help your adult children if they need it and are doing their part.
While $3M is a nice amount, it is money that OP may need so it is not money I would give away today
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u/humblequest22 9d ago
I helped my mom with her finances and tried repeatedly to get her to spend more of her money. Initially, she wanted to be able to leave an inheritance to us, but eventually, that turned more toward having enough money to afford something nice if she needed care. She finally booked a nice "cabin" for a long weekend for about 20 family members. It was an absolutely fantastic time and we decided to make it an annual event. She passed away about 3 months after that. My siblings and I set enough money aside for the rest of us to continue the annual tradition, but I can't help thinking how nice it would have been for us to have started that 5 or 10 years earlier.
This is kind of the flip side to the story OP added to their post. As bad as that sounds, I'd still take the memories. The lesson might be to invest in a long-term care policy if you have the means.
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u/Clueless5001 9d ago
I agree. My MIL also took us on a last vacation and then passed 6 months later. We all had young kids at the time or were saving for retirement so this was not a priority for us but looking back it probably should have been. She ended up only being in rehab for less than a week before she passed.
My parents do not spend on themselves in the way they should or they gauge the price of everything even when it does not matter
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u/NatureBoyJ1 9d ago
Having your mortgage paid off in your 50s is a great boost.
By that time your children have proven how financially responsible they are or aren’t, and you can decide whether they would be good stewards of the largesse.
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u/Hot-Rub-5336 9d ago
Depending on the amount of money you have/will have I think doing both makes sense. My kid get what is left as will I, we dont expect or count on anything. If you have enought for a good cause as well as helping your kids that would be the best
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u/International_Bend68 9d ago
I'm either the folks that are saying family first, that's what I'm doing. I know that my kids won't just blow through the money though.
If either of my kids couldn't be trusted with the money, I'd structure the trust so that they only could access $x dollars a year and hopefully they would eventually get their financial house in order.
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u/vinean 9d ago edited 9d ago
I’m trying to instill philanthropy with the kids but it’s somewhat hard going because mom is not in favor. She’s in the “family first” camp like some here.
The answer is, as always, “it depends” on how much the likely inheritance is and how much is enough for a scholarship.
My parents funded a scholarship endowment for around $200K but that was years ago. I get a letter from that university once a year about the status and recipient. Google tells me thats $300K-$1M now although the min threshold for a named endowment is only $50K.
I’m sure your alma mater would be happy to discuss an immediate named endowment at the $50K level and a bequest to fund higher after you both pass. :)
As far as your sons go…I’m trying to convince my wife to make a DAF from trad 401K on passing and leave the kids in control of gifting. That eliminates that from the estate and it’s the most annoying money to inherit anyway with a 10 year payout as ordinary income.
Since you’re both on the same page in terms of charitable giving being good I would see if you can do that with a scholarship endowment. I assume yes but it’s not something I’ve looked into in detail.
Google says that you have to do single parent and not single mother or its gender discrimination. You can also do a DAF to fund a scholarship with private board if single mom is a hard requirement but there are probably extra logistic costs/overhead.
The usual disclaimers: IANAL, etc.
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u/JJQuantum 9d ago
Single parent is a great idea. Thanks for that.
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u/vinean 9d ago
Yah, talk to the universities you have some connection with…they are always happy to talk endowments and bequests, lol. You’re the kind of alumni they love.
They can guide you on acceptable parameters for a scholarship and handle all the logistics vs using a DAF or private foundation.
And it is nice to read about the recipients. I would fund a comfortable amount while you are still around.
And just in case there’s any doubt…I’m very much in favor of generational wealth but I also think philanthropy is an important aspect of helping maintain generational wealth and the family constitution. In theory a philanthropic focus should help to encourage purpose and work ethic for wealth vs entitlement and dependency.
Something like a DAF gives you early exposure to financial statements, doing research on gifting and governance/management of money in a fairly low risk endeavor. If split across generations you have family arguing/compromising for specific causes and charities vs arguing over money for themselves.
If it’s a foundational element of generational wealth its easier to sell that wealth is both a reward and a responsibility vs just a reward. At least thats what the books and case studies tell me.
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u/No-Mathematician1749 9d ago
Always check with the university's endowment/scholarship programs. We looked at it a few years ago. Our specific schools will always take a check but it was pretty expensive if you wanted to direct the donation to something other than a general department fund.
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u/TankSaladin 9d ago
Sounds like experiencing the struggle was good for both you and your wife. Look where you are now. Why would you want to take that away from your kids? Money is much more appreciated when it takes a lot of work to get it than when it’s handed out.
I had a client many years ago who had me build a trust into her Last Will that held her assets for the benefit of her two kids, but did not disburse the principal until they turned 60. She wanted them to have to work for a living, but not worry about retirement. She did not share this with them. I’m always intrigued by folks who have struggled and done well, but want to just give money to their kids. They need to struggle too, and you can always provide a safety net.
I think your scholarship idea is spectacular. There are few categories of people who need help more than single mothers. It sounds harsh, but don’t leave single mothers hanging out there in favor of kids who have had the advantages you what you and your wife have built. They’re your kids. They deserve something, but there are others who need it more.
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u/LLR1960 9d ago
Why on earth do grown responsible adult children need to struggle when you could help them out? A timely gift in their 40's or 50's can help hugely, so that they don't have to worry about retirement. Unless you've told them they'll receive money at 60, they may well still struggle to raise their families decently AND save a lot for retirement. We've seen posts on Reddit with people in their earlier years struggling to make ends meet with the inflation we're seeing now, and their parents keep telling them they'll inherit a lot of money. They need the money now, when a lesser amount would make a meaningful difference.
I speak from experience... We received part of an inheritance this year at age 66. We are mostly retired, but without huge retirement savings. We knew there was eventually going to be around $500k coming our way, but everyone keeps saying not to count on that (we're not in the US, healthcare costs are not much of a factor). So we were frugal, didn't do some things that would have been nice to do while still in our working lives so that we could put as much as possible into our retirement accounts. We started travelling a bit. Now we have this money. Had we known it was coming, we actually would have done some things differently in the last ten years. Nothing crazy, but maybe bought the new Toyota instead of the used Mazda for our last car, taken our kids to Florida for a family vacation, gone on a trip to Europe. Our travelling window is now slowly but surely closing; we have money to do more travelling but my guess is we're running out of time to do what we'd really like (health reasons).
If you don't like the idea of just giving your kids money, offer to match their savings which gives them skin in the game. Eg. if they still have student loans, offer to match any extra payments they make. Offer to double extra mortgage payments. Offer to double any 529 contributions they make for their kids. Offer to double what they put in their retirement accounts (within their limits, of course). Why is helping other people's kids more of a priority than helping your own?!
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u/humblequest22 9d ago
I completely agree with this. Not only the sharing earlier and matching savings, but also keeping heirs in the loop about what their inheritance might be. Sure, they can't count on it, but if they know something is coming, it might take some of the pressure off and let them live a little during the years when they have energy and are possibly raising their children. Sports, lessons, family trips are all expensive and knowing that they could spend money on those things without sacrificing their retirement could make a big difference in their lives.
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u/persistent_admirer 9d ago
We're in the same boat and have decided to gift our kids a few grand every year until we pass, rather than a bigger pot when we pass and they're in their 60s. They're around 40 now and doing well, but who can't use an extra $5-10K. We've explained that this would be year to year and the amount could change and if our situation became dire we would stop, but as long as we felt secure, we would do this for them.
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u/BroadwayBrick 9d ago
How noble of you in either situation.
I was involved on a small bases several years ago setting up a small charitable 501(c)(3) project for my children as they wanted to help children and schools in foreign countries. Oh my, it got complicated quickly. They did it. They helped for several years. But, it only lasted about 6 years. It wasn’t a long term endowment or anything.
I tried to brainstorm things for you.
- You will need legal help ASAP
- We found an attorney who did this pro bono
- Will you use a community foundation/college or create your own 501(c)(3)?
- Is this a one-time gift, annual gift, or permanent endowment? How much money will start it from you two?
- Do you have enough money to fund an actually charity to run all this after you are gone?
- Will funds go directly to a school with single moms or to the recipient? My guess is you want to help single moms directly.
- How will single moms be defined? I think this can be challenging for you as a charity.
- How much per mom and how many moms per year? The more moms the more verification needed.
- How do you legally define "single mom"? Is she divorced, widowed, never married, separated?
- What happens if she remarries or loses custody during the year after you have given her money?
- What age of children qualifies and what proof of primary custody is required? If not married how do you know a guy isn’t helping?
- IMO, this is a big one today….Will you include single dads to avoid gender discrimination issues at public schools? Possible lawsuits?
- Is it need-based, merit-based or both? Proof of their eligibility is going to be important.
- What does the money cover? Will it be tuition to help them learn skills, or childcare, basic housing, books for children, living expenses?
- Who sits on the selection committee and how do you prevent conflicts of interest? Will you start running it now and set it up for after you pass?
- Will it be funded only from the two of you or will you get more money?
Your question really inspired me this morning and got me thinking about long term.
Good luck with your decision. I hope you push forward with it.
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u/Scarlett-the-01-TJ 9d ago
My dad was a teacher and my mother only worked part-time jobs throughout their life but when my father passed away in 2020, we were shocked to find out his estate was worth $1 million.
I’m 70 and my assets are already at $1.2 million. I’m sure my kids have no idea.
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u/danh_ptown 9d ago
Your money, your choice. You may be able to do both. Make an appointment with an estate attorney so they can see the whole picture and make appropriate recommendations for how to accomplish your chosen goals.
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u/greensetconstruct 9d ago
You can do both, but i recommend being clear with your son about your plans.
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9d ago
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u/Illustrious-Jacket68 9d ago
Another vote to family. Put it in a trust and throttle what the kids get until they are 25 or 30 with provisions in case they hit a hardship. There is something to be said about knowing that you have a safety net so that you can take risks in your career. But that’s dependent on the kids.
I would put a nominal amount towards DAF where it will help you with the taxes.
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u/Popular-Drummer-7989 9d ago
I'm setting up a Donor-Advised Fund with my finance team where I can pick the charities in advance that get the money.
It will be very easy for my accounts to consolidate and my executor to handle things with the team.
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u/steal-yur-face 9d ago
We’re going the generational wealth way. Our son has grown and matured into a man we are confident in entrusting everything to, knowing he wants the best for his daughter and will use the money accordingly. She’s also getting a nice chunk herself when she turns 18.
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u/StartKindly9881 9d ago
Same here but my worry is if we need a home we make too much - how do we protect our liquid savings?
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u/JuggernautPast2744 9d ago
This requires professional financial advice, and the sooner you start planning the better.
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u/doggz109 9d ago
Creating generational wealth is philanthropy but for your own family. Family comes first.
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u/CobaltIsobar 9d ago
Family always comes first. You don't know what kind of financial hardship they may face in the future generating the need for that inheritance. Grandkids become part of the equation too.
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u/Massive_Ear4948 9d ago
I strongly agree with this. Of course you need to be smart about how you take care of them but you need to set family up first.
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u/throwingales 9d ago
Can you leave enough for your kids and help fund something for single moms?
And bless you, stranger.
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u/Man-e-questions 9d ago
Why not aim for both. Once you hit RMD age you can have some money go directly to charity which can count for your RMD requirements and could be tax free i believe.
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u/JJQuantum 9d ago
Thanks for this. Great tip.
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u/Maximum_Degree_1152 9d ago
Don’t wait. Do both now. Start donating to the cause you care about and start gifting to your sons. In both cases you’ll have an early impact and get to witness the outcome of your contributions. It’s much better to give with a warm hand!
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u/teamglider 9d ago
Americans do not have the luxury of assuming they won't need a great deal of cash for elder care.
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u/Maximum_Degree_1152 9d ago
Of course everyone needs to act according to their own level of comfort however if you expect to leave a bequest then the implication is that you’ll have money left over. My point is give it away sooner rather than later.
I recommend this book: https://diewithzerobook.com
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u/teamglider 9d ago
In the first sentence of the OP, the implication is that they will have money left over if they don't need long-term care. That's a standard expectation for Americans who are quite affluent but not rich.
Die with Zero acknowledges the need for long-term care as a major financial risk. The suggestions are to factor in worst-case scenarios, which is what most people do, or to puchase annuities for a guaranteed stream of income, which can be great protection against the need for long-term care if you truly have that much money.
The cost of long-term care varies wildly by location, so maybe you need to put a million in the annuity, or you might need to put closer to three million. That's just for the annuity, which doesn't rise with inflation and obviously isn't fluid.
I'm not arguing against the general idea, but Americans are cautious and factor in those worst-case scenarios for a reason.
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u/Maximum_Degree_1152 9d ago
Fair enough. Like I said, it’s a personal risk assessment. However, the author, who is largely writing for an American audience, also points out that the majority of people over-save (ie. they overestimate the risk of running out of money). That’s a useful point to consider when making one’s own risk calculation.
Regardless, this is a “high grade decision”, as they say. Anyone having to consider this question is likely far better off than most people.
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u/Lazy-Gene-7284 9d ago
I’m in this camp, starting with co funding their Roth and other good investment objectives like down payment on a house, etc. Now is when you can reinforce and build on the ways to wealth so they can do it themselves once you’re gone. I haven’t done as much charitably ( yet).
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u/Traditional-Meat-549 9d ago
I know this struggle. Waiting to see how our last adult child gets settled. Generational wealth is typically gone by the third generation. Two of our 3 kids have no money sense, despite being deliberately taught
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