Transferring Generational Wealth While You're Still Living

Most people live their lives, work, build whatever wealth they’re fortunate enough to build, and then eventually die.

Then the kids get whatever they didn’t spend.

The problem is that by the time this happens, the “kids” might be 50 or 60 years old.

They’ve already gone to school.

They’ve already started their careers.

They’ve already bought the house.

They’ve already had kids of their own.

And if everything went according to plan, they’re probably getting pretty close to retirement themselves.

So I would argue that if you’re fortunate enough to have the means to leave significant assets to your kids, why wait until you die to start helping them?

What’s one thing young people have?

Time.

What’s one thing wealth needs in order to really grow?

Time.

That seems like a pretty good combination.

What benefit does it really do your 60-year-old son to inherit a few million dollars after he has already spent most of his life working, raising kids and paying for everything himself?

I mean, sure, he probably worries a lot less about retirement.

That’s great.

But what if some of that money could have helped him at 30?

Maybe it helps with the down payment on a house.

Maybe it gives him the ability to start a business.

Maybe it helps with childcare when his kids are young.

Maybe you help him start investing earlier than he ever would have on his own.

Or maybe you just start teaching him how to protect money before he ever gets enough of it to really matter.

That last part is probably the most important.

The Money Is Only Half of It

One of the worst situations I can imagine with generational wealth is the parents who “handled” everything.

The kids never had to think about money.

They never learned how investments worked.

They didn’t know what accounts existed.

They didn’t know what bills were being paid or how.

And then one day Mom and Dad are gone and they inherit a bunch of money they have absolutely no idea how to manage.

That doesn’t sound like freedom to me.

That sounds like a disaster waiting to happen.

And don’t even get me started on people who are proud that their spouse knows absolutely nothing about the family finances.

“I handle all of that stuff.”

Okay... what happens if something happens to you?

Now your spouse is grieving while trying to figure out where the 401(k) is, how to pay the mortgage, who the insurance company is, what accounts exist and who they’re supposed to call.

That’s not protecting someone.

That’s setting them up to be incredibly vulnerable when they’re already going through one of the worst moments of their life.

The goal should not be making sure the people around you never have to think about money.

There’s a big difference between never thinking about money and never worrying about money.

I think we should be aiming for the second one.

Money Is a Tool

I understand why people don’t want money to become the center of their lives.

I don’t either.

Obsessing over every dollar you spend and making your entire life about getting richer sounds miserable.

But money is still the tool that makes most of the world go around.

It pays for your house.

Your food.

Your car.

Your healthcare.

Your vacations.

Your kids.

And eventually, if you build enough of it, it buys your time back.

So I don’t really think financial illiteracy is acceptable anymore.

You don’t need to be Warren Buffett.

You just need to understand some pretty basic things.

Pay yourself first.

Invest before you give yourself the opportunity to spend everything.

Buy things because they actually have value to you, not because of what you think they make you look like.

Those are two completely different things.

Use a credit card like a debit card.

If you don’t already have the money, don’t buy it.

Learn the difference between leverage and bad debt.

Borrowing money is not automatically good or bad. What you’re borrowing it for matters.

Understand basic investing and compound growth.

You do not need to know how to build a discounted cash flow model.

Just understand what happens when money is allowed to sit and grow for 20, 30 or 40 years.

If you understand those basic things and actually live by them, congratulations.

You’re probably already more financially literate than most people.

Generational Wealth Doesn't Have to Mean Millions

Maybe you never have millions of dollars.

Maybe you never have enough money to start handing your kids giant checks while you’re alive.

That doesn’t mean you can’t transfer wealth.

You can transfer habits.

You can transfer knowledge.

You can teach your kids how to invest.

You can teach them not to finance every nice thing they want.

You can teach them how to use credit.

You can show them why constantly upgrading your lifestyle every time your income goes up is a trap.

You can make sure your spouse understands what you own, what you owe and where everything is.

That stuff matters.

And then if you are fortunate enough to build significant wealth, you can start thinking about whether some of it would do more good while you’re still here.

There are obviously tax and estate-planning considerations here, and I’m not saying you should randomly start gifting appreciated assets without talking to somebody who actually understands the tax consequences.

I’m talking about the mentality.

Why should the entire wealth transfer happen at death?

Why not use some of it when your kids have the most time for it to actually compound and the most life ahead of them for it to actually help?

And more importantly, why not teach them how to handle it while you’re still around to answer questions?

Because the best inheritance probably isn’t just money.

It’s making sure that when the money eventually arrives, the people you love actually know what to do with it.