Planning for your beneficiaries

Historically, when people passed away they left their assets (in the most common scenario) to their children in equal shares.  Since most people didn’t have much this made perfect sense.  Several things have happened to make this a plan worth re-thinking.

First, the current generation that is likely to pass in the next 15 years has a lot of money.  They benefited from long uninterrupted careers with one company, employer pensions, relatively low educational expenses for their children and a favorable stock market and interest rates.  As a result many in this generation have substantial home equity and savings.

Baby boomers, those born in the 20 years post WWII, benefited from most of the aforementioned factors, but those born later were far less likely to enjoy pensions or uninterrupted employment.

The next group, Generation X, now in their late 30’s and early 40’s suffered more than prior generations during the recent financial crisis.  Many lost all or significant home equity and substantial stock market losses; since rather than pensions, their future is based on 401k accounts.

The next group may have even more problems as they are saddled with student loan debt and a job market that is unlikely to provide many years of uninterrupted employment.

As a consequence of the foregoing, an estate plan that retains money for its beneficiaries in trust, providing income annually and principal on an as needed basis has become a well-received option.  Such a plan is not for everyone, but for those with substantial assets, children with poor money management skills, or concerns about their children’s marriages, a plan with some brakes on the distribution may be something that provides benefits to those we love long after we are gone.

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