Your views on inheritance to children

Thank you to each person who responded to the article on leaving too big a legacy to your children in the form of money and possessions.  Your opinions have expanded the topic for further discussion and insight. – Kim Forbes

 Practical advice from Brian Herman:

There is another way around the legacy problem. Take out a last survivor policy which the kids will own and pay for.

The advantages of this are the following:

  • The kids pay for their own legacy.
  • The amount is up to them.
  • Premiums can be increased to increase the value of the legacy (again, up to the kids).
  • Premiums can be stopped when the first spouse dies, or continued.
  • Because the parents no longer need to provide a legacy, they can spend their money on themselves without concerning themselves about a legacy.
  • There is a chance in the next budget for the estate duty threshold to be increased to R15 million (per couple in a marriage) before estate taxes and capital gains tax will need to be paid.

Comment from Harold, in view of our South African context:

Interesting article and I agree with most of the sentiments. My comments are based purely in a South African context assuming that my children will live in S.A. for as long as it is economically viable for them to remain here. I understand this is not a political forum but the current situation has a strong bearing on my views on what and how much I would like to bequeath to my children.

I find that as a family we were able to get by with a lot less many years ago. The purchasing power of our rand diminishes each day as the political situation deteriorates with not much hope of the situation turning around anytime soon or the distant future.

So what has all of this got to do with how much or little one needs to leave to your children.

I come across many highly educated people without work or much hope finding any anytime soon. Against this background I believe I need to contribute sufficiently towards a venture of sorts to get them on a sound footing and then allow them to grow and develop this further. Depending on the responsibility demonstrated by them I decide on the need and amounts to disburse further.

Any amounts in excess of that needed to get them on a sound footing would need to be prioritized against the many charitable needs in the Country.

Another Chartered Wealth Solutions client’s view:

(This client jokingly said that he was the very well-dressed parent in a Ferrari sending his response from his holiday home in France while drinking champagne in the jacuzzi!  Lovely sense of humour …)

We attended a meeting at Chartered House some time ago with the aim of ensuring that our will was well specified to avoid fights among heirs. When asked for my opinion, my answer was “NOTHING” (as your article suggests). If there was something left over, I would change it into Travellers Cheques and take it with me to wherever I would end up.

Here is my thinking:

  • The earning capacity of the youngsters today is unreal compared to “our days”. Many costs are proportional but not today’s earnings for the younger generation -totally out of proportion.
  • I have thought about paying off a bond but that would open the door for loans again against the access bond.
  • Touching pensioners’ savings is an absolute NO NO! I have come across too many pensioners who have assisted (even selling their houses and having to downgrade) their children who have got themselves into deep trouble. I cannot recall one who repaid his parents no matter how badly they had been affected.
  • My parents never assisted me in any way when I was struggling; they could not afford to.
  • My mother went for an interview after I left school; she then drove me to Rand Airport, stopped in front of Hangar No 2 and said: “This is where you will be working!” I left after 51 years if service. So THANKS, MOM! I will always be thankful to my dear dad for sending me to a private school for a good grounding. I knew what his salary was and the monthly school fee. Inheritance need not always be in a monetary form. My parents worked hard for their money so let them enjoy it.
  • I inherited my father’s ID Book, ashtray and cigarette-making machine and about a thousand rand from my mother when she passed on (originally R12,000 but reduced by legal costs).I have no regrets about being forced to stand on my own two feet – a hard lesson with many uphills, but we have managed to retire very comfortably.
  • Don’t get me wrong: I am a parent and just as my mother would ask me when getting into the car (up to age of about 60): “Have you been to the toilet?”, so one never stops loving and caring for their children who grow up so quickly … but leave home so slowly.
  • PS To my heirs there will be a 15% penalty every time I hear “Hey slow down you are spending my inheritance”.

From Bridget Randall:

So-called wealth and warm gifts can cause another problem. Mothers, in particular, can create problems by giving endless hand-outs, and a financially ignorant child making no provision for the future of his family, due to his expectation of what he would inherit, despite warnings from his siblings.  And a financially unaware parent can create expectations that way exceed what will be inherited.

Those of the second or third generation group, especially where a family trust is involved, can be pretty clueless – not all are financially astute.

I think financial education is one of the greatest gifts we can give a child or grandchild, even if it has to be simplified; for example, showing an old book you bought new, say, a R3.50 recipe book and the equivalent price on a new one, or for a young adult, showing just what their salary is worth if it was from investment money at 5% drawdown currently.  This really shakes some of them.  Unrealistic advertising does not help, such as a young adult getting one million disability cover and showing his family living a good life – total rubbish.

Finally, from Chartered Wealth Solutions financial planner, Christina Forman:

A brilliant article. Most parents struggle with the questions raised in the article, and more so where some children are more financially successful than others, and seemingly do not ‘need’ anything from their parents according to the less financially fortunate members of family.

The best legacy we can leave our children is to teach them sound values, respect for themselves and others, and above all love and care. The legacy of monies should be a bonus.

The amazing client feedback shared in this post was received in response to Kim’s initial blog post:

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