What’s the Right Way to Leave Money for Children?

My Struggle with Future Family Planning

Suddenly, it looked like for the first time, one of the businesses I invested in was really going to be worth something. I was 43 years old and into my third year of full-time angel investing.

Up to this point, my net worth was edging downward month by month. I was married with four children, cars, houses, and educations to fund. I was having restless nights’ sleep as I wavered between angel investing and getting a job.

I met with David, a wealth manager and one of the wisest people I knew about money. This is the guy who a year earlier told me, “If your net worth continues to drop, I will need to move you to one of my associates.” That was then. It is amazing how one business success can change a financial picture.

Moment of Clarity and Truth

He began this meeting differently. “It looks like your net worth is going to increase. This one investment you made is going to make a big difference. We need to do some estate planning.”

I never thought I would need an estate plan. I was thinking, David sees a lot of these situations. He believes I’m going to be worth something one day. Apparently I had stopped believing that at some point early in my angel investing career.

“I have no idea how to think about estate planning. Where do we begin?” I asked.

“Let’s start with how much your father left you and how much my father left me,” he said. I still remember this answer like it was yesterday. It was one of those moments of clarity and truth.

My Father Left Nothing

As I write this, I can still picture both of us sitting at that conference table with the window looking out into the office to my right. It was December, late in the afternoon, around four o’clock.

“My father didn’t leave me anything,” I said.

“My father died when I was fourteen. I was the oldest of seven,” he explained.

He went on, “You don’t need to leave lots of money to your kids. Look at us. We turned out just fine.”

This was the baseline for my estate planning. But I still wasn’t sure David was right. So I talked to an attorney friend named Jim who headed up the estate planning practice for a large law firm. I explained what was happening to the investments I made and where my career in early stage investing was headed.

“What do you think I should do?” I asked.

Pay as Little as Possible

“My job is to design estate plans which pass as much of your net worth to the next generation as possible. I do this through my gift tax expertise, understanding of the estate tax laws, and by using alternate corporate and personal entities. But the goal is clear. Pay as little in taxes as possible and pass as much as possible to your children and grandchildren,” he explained.

“Is that what I should do?” I asked again.

He then told me this story.

“I spend almost every Saturday morning refereeing wealthy family estate meetings. These are estates with tens of millions of dollars at stake. Present are the first and second generations of estate recipients. This is the worst part of my job,” he said.

“What happens in the meetings?” I asked.

Gold Diggers and Bums

“Everybody is married. If the family member is a son, then his wife is always looked at as a gold-digger by the rest of the family. If it is a daughter, then her husband is viewed as a bum. I have to facilitate solutions to the family objectives with these built-in prejudices in place. It is not a lot of fun,” he explained.

“Between you and David, it appears as though you are telling me that upon our deaths, Kathy and I should give everything away,” I said.

“I’m not saying that. You need to do what you think is right for your family. As the couple with money, you need to understand you are making decisions which will affect future generations. This decision must be made in an informed and prayerful way,” he said.

“There is no right and wrong. David and I are just telling you what we deal with in advising families in this estate area.”

You Can’t Take It

Thus began the struggle of estate planning, which I now understood as our future family planning. As you would expect, Kathy and I came at it from two very different perspectives.

Kathy is the mom, the protector. She wanted the kids to have it all. As the first person in my family to “make it,” I wanted the kids to get the same amount I received when my dad and mom passed.

We eventually worked it out. Then worked it out again. And I am sure, as our children continue to marry and have children, we’ll work it out again.

With age comes wisdom and experience. The first estate plan at 40 was a start. I know it will change as we learn more about life and gain a clearer vision for our family.

My dad used to say, “Coffins don’t have saddlebags.”

Proverbs 13:22 (NLT)

Good people leave an inheritance to their grandchildren,
but the sinner’s wealth passes to the godly.

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2 thoughts on “What’s the Right Way to Leave Money for Children?

  1. As Bill Gates once said, “you should leave them enough to do whatever they want, but not so much that they don’t have to do anything.” I have always liked that.

    Natalie and I’s plan – which may be a modest net worth currently, but would have a sizable amount if we both died – has them have their college all paid for, a reasonable house paid for based on where they live (say, Atlanta 500k), and if they haven’t started their careers a reasonable car. The rest gets left to the Church and Christian non-profits.

    The thought is that if you have a college degree and a house paid for, you should be alright for the rest of your life, but you still have to do something to put food on the table and be a person of value to society.

    It would change a bit if I had grandkids I am sure as I would start to take them into account I imagine. I am sure, like you, my plans will change over the years as hopefully the family and net worth grow.

    • Good start. This all makes sense based on where you guys are right now in life. It is good that you are thinking about it. Every decade the plan should be reviewed. A lot happens in a family in a decade.

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