ST. CROIX INSIGHTS

Leaving your kid(s) a million dollars as your departing gift

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Tears of sorrow or tears of joy. That’s the discussion I have with my family about that day I depart Earth in the physical form. As much as my family “loves” me, there will be tears of joy ☺ as Mrs. Anderson now can hire that pool man I’ve denied her all these years. And not to mention the son who loves cars, but only had a bicycle until he was 25 years old because his old man was too cheap to buy him a car. Now he can buy that Ferrari he’s dream about all these years.

Being in the money business, I see how greedy loved one’s can become when their “loved one” dies, sometimes even before their body arrives at the funeral home. I hope to avoid this in my household. I’m looking to treat everyone the same – fairly, as I define fairly. That generally means equally barring any outside circumstances such as health, disability, mental or other illness that would limit their ability to take care of themselves financially. Hopefully I’ve done my job well enough and taught my children about the value of money which hasn’t been always easy. I have one kid who has his first dollar he earned because he uses mine (which is smart on his part) and another kid that if they have a dollar, it’s a dollar too much. So I know I have more to work on with them.

Yet I want to make we sure have ongoing conversations as a family around what kind of responsibility comes with having this type of money. I believe there are different kinds of money – money you’ve earned and that which is found (which comes in different forms). The kind of money we’re talking about requires a greater level of responsibility because it wasn’t earned for those receiving it. I have no desire that this money becomes easy come, easy go. If I ever suspect that’s the case, I’ll have the necessary precautions in place to prevent that. Because the money they’d receive was either hard-earned through the fruits of my labor, or I literally had to die for it.

Yet I want to make we sure have ongoing conversations as a family around what kind of responsibility comes with having this type of money. I believe there are different kinds of money – money you’ve earned and that which is found (which comes in different forms).

The kind of money we’re talking about requires a greater level of responsibility because it wasn’t earned for those receiving it. I have no desire that this money becomes easy come, easy go. If I ever suspect that’s the case, I’ll have the necessary precautions in place to prevent that. Because the money they’d receive was either hard-earned through the fruits of my labor, or I literally had to die for it.

Leaving each of my kids one million dollars can be accomplished a couple of ways. I can leave my IRA’s, investment accounts, business, home, etc., to them and we’re good. I think that would work but its subject to stock market risks, interest rates, income taxes, estate taxes, lifestyle costs, and healthcare expenses. So when I say “I think,” I can run all kinds of financial scenarios including that really cool Monte Carlo software that spits out the probability of hitting my goals. It’s still a guess at the end of the day.

Another way is I could accomplish my goal is – wait for it – the dreaded two word financial tool called life insurance. Does it make sense to take a small about of money now and purchase a single life insurance policy on me or a joint second life insurance policy on Mrs. Anderson and myself to guarantee that my kids will receive the gift I’d like to leave them? Do I want to eliminate the risks I’ve outlined above or if I fall short of my goal, does it matter? Many feel like the rate of return on life insurance stinks, yet they factor the internal rate of return. Depending upon on circumstances and/or if I want a guarantee to accomplish my goals, could it be the most efficient use of money? Trade-offs – life is full of them.

I’m in the camp of that it if I fall short of my goals, I’d like to leave a legacy behind for my kids to be impactful with their families and community. I know, some individuals have no desire to leave their kids any money and that’s your choice. I’m not judging either way. It’s a personal decision. I want to make sure I can accomplish my goal no matter what the future brings my way and I’d rather have the security of knowing that at my death I’ve completed my bucket list (the best I can with what I’ve been given) and this is just one of those items on my list.

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