Ep. 069 - Legacy & Estate Planning Tips You Won’t Hear Anywhere Else

Episode Transcript

Austin
Answering the question how much is enough is challenging on a personal level. When we asked that same question, but with heirs in mind, it can be even more difficult. Today we will discuss setting caps on how much we pass on to heirs.

Spencer
Of all the provocative things that we talk about, this may be as much as any. And that it is as Americans, the typical estate plan is how many children do you have? What is your net worth? Take your net worth, divide by children and pass out equally there. But what we're going to be talking about today is how much is enough for our heirs.
So a different set of questions, a different line of really thinking. But it's the natural extension of us as stewards. It's not just ensuring that we are acting as stewards, but trying to think about the next generation and how they're going to be the next stewards of these resources that God has entrusted us to. So where do we start?
Here, Austin?

Austin
Yeah we start. We come back and this is finishing up our series on Finish Lines. We've talked about what does it look like to set a budget to then ask, okay, if I have a budget, I can set a spending cap or an income cap and then we move on to savings. How much is enough savings? And now we come to heirs.
And the reality here is it just continues to build on itself. And we really need to continue to ask all of those questions of how much is enough not at a single point in our life, but throughout our lifetimes, because God may encourage us or challenge us to give more abundantly to his kingdom, and we want to be able to joyfully participate with that because God has abundantly provided for us.
He's done incredibly generous things with us throughout our lifetime. We always wanna respond in grace. And so when we think about these finish lines, it is again, once we hit that number, whether it is for income, spending, savings or even passing along to heirs, then we start saying, okay, what does God want to do with the rest? Does he want us to participate with our local church?
Does he want us to participate with other charities or alleviating poverty? Whatever it is, we want to have hands open to the Lord to say, once we hit those, those targets that you set with Jesus, then we get to be more generous through our lifetimes rather than just continuing to either build up a second or third barn, or put it in my own pocket to be able to live more luxuriously.
This is not so that I can increase my lifestyle, but it's so that I can participate with God in all of the kingdom work that he's doing right now. And so again, we think about why is this important that these this idea of setting finish lines, it's because we come back to the challenge that Jesus talks about in that parable where he's talking about the person with the barn, and he says, I've built up enough treasure for myself for many lifetimes to come.
I'm going to eat, drink, and be merry. And the parable goes that Jesus says, your life is going to be asked of you tonight. What are you going to do with those riches? We don't want to be people that build up second, third and fourth barns. We want to be people that are conduits of God's grace to the world.
Unbridled wealth, unbridled accumulation is never good for anybody, whether it's for myself or for the next generation. And so really, we need to start with this question of how much is enough? Praying for wisdom with the Lord, talking with friends, having conversations to be able to set those finish lines and live open handedly with all the resources that Jesus has given us.
And so it's really challenging with heirs because there's more relationships involved. If it's just me and my spouse, we can pray about it. Kayla and I can have conversations and we can start setting standards of how do we live. But when you bring in a third party, whether it's a child or a charity or a nephew or a niece, that's a whole lot harder because I don't have control of their decision making ability.
I don't know control of my spouse, but we can talk about it more regularly. With my kids, I have to trust them with the Lord. I have to trust that they will make decisions that are going to honor the Lord or not, but I can't; I can raise them up. I can guide them. But at the end of the day, I have to release them to the Lord, too.
And so this is really a challenging place that we come to. And we would say, as we have these conversations about leaving an inheritance for heirs, one of the most critical pieces is that you actually have a conversation. If you don't have a conversation with them, then if you leave all of your resources to charities, you don't want to leave them bitter.
You want to have that conversation. If you plan on doing the traditional American estate plan and divide your net worth by your number of children, tell them that you're going to do that. If you're going to leave most of it to charity and just leave them a little sliver. Talk to them. Have the conversation. We would say it's really important that you have these discussions at appropriate ages and throughout life.
If your plan is to give them nothing at your passing because you're giving them gifts throughout their life, just make sure that they know that. Because we want them not to be at a place of contention with you or to be upset. And they're asking the Lord, why didn't they do this, that or the other for me?
You want them to have that honest conversation. You want to be able to engage them in the process throughout lifetime. Anything else you would say Spencer, in terms of what do we need to think about in terms of foundational for thinking about leaving resources to heirs?

Spencer
Well, one of the things is usually you're not going to have a perfectly matched set of resources when you pass away with what you would like to allot to your heirs. So the amount of resources is going to go up and down. None of us knows the day or the hour that our life will be demanded of us.
So it could be that you save and investments do really well, and you haven't been able to give away all during your lifetime, maybe even that you had intended. And so there's more there at the end that might need to go to charitable institutions or other people beyond, say, primary heirs. There could be other situations where you have less than you had actually intended to pass to them.
Hopefully, you've given generously during your lifetime and been able to, you know, invest in, those relationships. But, it's never going to perfectly match. And that's one of the challenges, is we have all those relationships, but we have a heightened level of uncertainty, too, because our time frame is, is variable.

Austin
Absolutely. And so how do we practically approach this? We love that Ron Blue. His suggestion is we love all of our kids equally, so we treat them differently. And I think this is a big challenge for those of us in the West because we think the best way to love our kids equally is to give to them equally.
But we don't treat our kids equally. That's the way that we love them well and [sic] thinking about heirs, it's like if one child has done really well in life, let's say they're a doctor or a nurse, another child has done really well as well. But maybe they're a missionary. There may be an unequal level of need there.
There may be an unequal level of passing resources along to, to say, hey this is how we love each of you all. But again, come back and talk about it. How do you accelerate gifts in certain ways and not in others?

Spencer
Well, and even just thinking about a recent conversation with a client that has, children in different parts of the country and different number of grandchildren, what they've grappled with is that one particular line of the family, it will be much more helpful if they can accelerate some of those gifts to be able to help, with a particular purchase.
Well, they talked about it as a family, though, and everybody's on the same page. And there's a level of love and trust among those where the other siblings were saying, yes, absolutely, please do that, mom and dad, because that's going to help this particular, beneficiary at a time of need, a lot more impactful being able to do it now than maybe in 20 years when kids are out of the house and might not have that same level of generational, wisdom transfer as well.

Austin
Yeah, absolutely. So as we think about how do we leave, how do we set finish lines, what are those kind of number or metric guidelines, one thing that we also come back to, there's a quote that we raised [sic] when we talked about John Wesley. And one of these past episodes. And when he was asked as he saw his congregants, their levels of income rising, they're getting out of poverty.
They said, well, okay, now we have resources. Do we just leave it all to our kids? And when he was asked about this, he suggested to leave them enough to allow them not to live in idleness and luxury, but by honest industry. And I think this is a really good thought and wisdom here. We want to be able to pass on resources to our kids if that's where God is leading us.
Now, if the Lord is saying, hey, we want you to give it all to charity in your lifetime because your kids are okay, then we want to honor the Lord first and foremost. But if the Lord is guiding you to give some to your kids and you've had those conversations with them, then don't give them so much that they can quit their job at 30 and never have to work a day in their life.
That's not giving them a pathway that is helpful for their souls. And so I really like that idea from Wesley of, we need to let them pass on where we're going to bless them. But not just let them live a high life and luxury and not actually understand that they need to work and to participate with God's work in the world.

Spencer
Yeah, we're equipping them to be able to potentially do anything that they want to except nothing, you know? And that's the way some would describe that, is giving an opportunity set but requiring that they still are moving toward that opportunity set.

Austin
Well, I think what you were saying there, Spencer, really comes back to that, this other idea that we've talked about in past episodes, you can look at episode 16 or 17 from April 2023 for some context, but this idea from Ron Blue that we pass wisdom before we pass wealth to our heirs. And when [we] think about it, if we've got a child who, let's say, has had struggles managing their money.
Do we want to pass them $2 million of resources in an account that they can access right away? Is that going to be good for their souls? Probably not. And so how do we do this with wisdom? How do we pass wisdom along to that child and not just pass them wealth? Because we don't want to just pass unhindered resources to a child that can't really manage their own.
And so we really, with prayer and with prayerful consideration, we come before the Lord and say, Lord, I've got these resources. How do I love my child well, knowing that they're in a place where they can't manage it themselves.

Spencer
Well, and that really comes back to we're a steward. We're not the owner. Yeah. If we're the owner, then we pass it on. Just like a monarch might pass from father to son or mother to daughter or whatever it might be, passing on those resources because they're our own. But if we're stewards, then we really have to say, is the next steward prepared?
Because if you again, if you have a master of a household, you are the steward. The master is not going to be pleased if you pass along resources to an ineffective steward. So in that line, I think we have to be really, really careful that the amount that we give is going to be steward, we have a high likelihood that it's going to be stewarded well.
And sometimes that can be a dollar figure. Sometimes it can be a percentage. A lot of it has to do with the family context, but it's not bad to pass a small or nominal amount that might be unrestricted and free, just as kind of a gift of love. But then if that child does not manage resources well, then passing on resources beyond that, there probably needs to be some level of thought of, you know, how are they,
how do I ensure that they have the highest likelihood of being stewarded well, if it goes beyond that smaller nominal amount?

Austin
Right, absolutely. So as we think about practical next steps, ways that we can implement this, there's like you were saying, there's never going to be a this is the dollar figure. This is the percent figure that we can say, okay, blanket it. Every one of your heirs should always get 10%. We can't, there's no way to actually frame that.
But some questions to consider as you prayerfully think about this with the Lord. If my heirs received X dollars today, if you've got your estate plan set up of number of kids divided by a net worth, well, let's look at your net worth divided by that number of kids. Okay, as you think about it, if they receive that dollar figure today, how would they respond?
You may not be able to answer it, but you may have a good assumption. You'd also think, could I give them X dollars annually for the next ten years, instead of giving them a lump sum in 20? Is that a better trade off? Can you accelerate, bring forward those gifts during lifetime, and then not give them as much later in life
or at your passing? Again what practical gifts would bless them today? Is it a down payment college tuition for kids or grandkids? Is it childcare cost vehicles or vacations? Are there things that you can be doing throughout your lifetime to participate with them? Again, do this prayerfully with the Lord and with your heirs. But is that going to be more beneficial because you can participate with them and seeing those gifts be made?

Spencer
Yeah, because in each one of these, there's a way that we can enhance the relationship. There's an earmark here of, hey, I see that you haven't had a vacation in three years. What if I provided, you know, the funds for this and then took care of, you know, your two kids or something like that so that you have a time to, rejuvenate as a married couple, you know, for instance, or, you know, it's down payment on a first home.
You know, you see, child struggling with rent, you know, every month if they had an opportunity to buy. It changes that dynamic, maybe gives them a stability of sorts there. Or, like you said, college tuition. All of those as we have a conversation, then we have a better opportunity to pass wealth along with, wisdom rather than just, hey, it's all coming to you whenever I happen to pass away.

Austin
Right, right. Yeah. And so I think when we give to heirs, we just want to always be considering. Is this going to lead them towards Jesus or is it going to be leading them away from Jesus? We want them to constantly be coming back to, God is their provider. It is not Mom and Dad's estate that is my provider.
And so I think even asking the question of how much is too much to give, will X amount of dollars lead them away from trusting in Jesus and trusting in the inheritance to provide for them? And so those are hard questions to ask. But if you're doing it in concert with Jesus, then he might reveal a dollar figure.
He might reveal a percentage figure, but even in that, how might we reflect our generosity and reflect Christ’s generosity to us, to our heirs? I think those are the kinds of questions that we need to start considering is okay, I want to lead them towards Jesus. He has been generous with me. How do I be a conduit of that generosity to them, both in life and in death?
And then how do we talk about that generosity that, hey, Jesus has given us abundantly. And so we want to be generous with you, both in life and in death. And then how do we do that without strings attached? I think oftentimes some gifts can feel like, oh, you're giving me this so that I can do that. We don't want any of these gifts to be quid pro quo.
We don't want inheritance to be quid pro quo. We don't want to be saying, well, I've seen you make bad decisions, so I'm not going to give you as much. But hey, we know that unbridled accumulation of wealth is not good for anybody. And so we want to help you continue to trust in Jesus as your provider, as we have trusted in Jesus as a provider.
But you have to do it when you actually talk to your kids. Because we want them to reflect. We want to reflect Christ's generosity, and we want them to receive from Jesus in the same way as we have.

Spencer
Yeah, I think there are a lot of different practical ways that we could approach this, given what the Lord may be speaking to each person in terms of how much he or she might pass on to the next generation. Sometimes the trade off can be helpful if we think, okay, maybe you've earmarked a quarter of $1 million for each of your heirs.
Would it be more helpful, you know, for them. And sometimes it would even be a conversation about this, but it would be more helpful for them if they received, you know, $12,000, $13,000 a year each year for the next 20 years, or a lump sum at the end of time there. Another way that you could think about it if you didn't have that
that dollar figure is okay, what's the median income for a person in that area where they're living and again, if it was $80,000 a year, you might say, okay, well, if I gave them three years worth of income there, that might be another way that you could look at it. It could be tied to, college tuition, or other types of things like childcare.
You could say, well, [I] think childcare, it sounds like it's going to be, you know, $15,000 a year, each year for, five years. And they have a couple of kids. And so, I want to be able to help with that. And so it's $150,000, you know, there over time. There's a lot of different ways that you could explore that.
But what we've seen as families think about that intergenerational wealth transfer earlier when they're heirs are younger, oftentimes the outcomes can be far better in transferring wealth with wisdom and with actual need. Because if people have had to go through lots of different things and maybe they get into their, early retirement years or their years that are just leading up to retirement, and now they get a significant lump sum, they may have already saved everything that they need.
They may be saying, okay, well, this is great. This is going to help me get a second home or something like that. That might be far less impactful to them at that point than it would have been if they could have had a lot of these different pieces along the way that could have, again, strengthened marriages, strengthen relationships with kids, help provide opportunity sets, or all along the way.
So lots of different ways that you could go on this, but hopefully this conversation has been able to, give you some ideas of the ways that you might think about approaching that question of how much is enough for my heirs, how do I go about laying that before the Lord? Because, we again pray Paul's commendation in 1 Timothy 6, would be true.
As for the rich in this present age, charge them not to be haughty nor to set their hopes on the uncertainty of riches, but on God, who richly provides us with everything to enjoy. They are to do good, to be rich in good works, to be generous and ready to share, thus storing up treasure for themselves is a good foundation for the future, so that they may take hold of that which is truly life.
Again, we pray that that is true of you and true of us as we provide this counsel. Hopefully you've enjoyed this series. If you have questions, don't hesitate to reach out to us. We'd love to have conversations about setting finish lines, with you.

Austin
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Disclosure
This content was provided by Second Half Stewardship. We are in Knoxville, Tennessee and you can visit our website at www.secondhalfstewardship.com. The information in this recording is intended for general, educational and informational purposes only, and should not be construed as investment advisory, financial planning, legal, tax, or other professional advice based on your specific situation. Please consult your professional advisor before taking any action based on its contents.