Kingdom Advisors founder Ron Blue takes an interesting approach to estate planning. He advocates lifetime giving as a way to assure that the objects of your bounty are worthy recipients of your wealth. This could play out a couple of different ways.
As Blue points out, there are three places your “stuff” can go after you die: to charity, to your loved ones, or to the government, attorneys, and other professional advisors by way of taxes and administration expenses. A good estate plan will minimize the amount that is bled away in the last category. A really good estate plan will help to make sure that your intentions regarding your loved ones and your favorite charities are carried out just as you intend.
Giving assets outright to your loved ones is a way to give them full control over and responsibility for those assets. However, one of your intended beneficiaries could easily lose his or her inheritance as a result of a divorce, car accident, or bad business deal. Life is unpredictable, and your beneficiaries may have no experience manageing or protecting assets. For this reason, many estate plans include ongoing trusts that allow the beneficiaries to have as much control as they are able to handle, while at the same time insulating the trust assets from creditors and predators who might try to take advantage of your beneficiaries and take those assets away.
The thing about leaving assets to your loved ones after you are gone is that you will have no idea how each loved one will handle his or her Inheritance. Your best guess during your lifetime could turn out to be wrong. So what about making gifts during your lifetime, so that you can see how your intended beneficiaries handle newfound wealth? Gifts allow beneficiaries to learn how to manage money. Gifting could also be a great way for you to “test drive” your estate plan and determine how well it works while you are still able to make adjustments to it. If one beneficiary turns out to be a poor steward of your wealth, you can always redirect assets in your final estate plan to other beneficiaries, or provide greater restrictions on a spendthrift beneficiary’s control over your hard-earned and carefully invested wealth.
The same principles apply to charitable gifts. Your favorite charity could turn out to be a poor manager of donated assets. It would be far better to find that out during your lifetime than to leave your loved ones regretting your philanthropic choices, especially if your family name will be memorialized and forever connected with your charitable gift. Knowing what happens now gives you assurance about how things will go later on. If your charity performs well now, you may add to your gift, upon your death. Not only that, but your gift may have far greater impact because you made it earlier. If, for example, you want to provide funding for scholarships so underprivileged children can go to college, the sooner you make your gift, the sooner a scholarship recipient will graduate from college, get launched in a career, and turn around and “pay it forward,” as you have done. Giving now also allows you to join other donors, to create large charitable projects.
As Ron Blue would say, you should consider “giving while you’re living so you’re knowing where it’s going.” This is simple but sound advice for anyone who prefers to test the water before diving in headfirst.
Scott Makuakane, Counselor at Law
Focusing exclusively on estate planning and trust law.
Watch Scott’s TV show, Malama Kupuna
Sundays at 8:30 p.m. on KWHE, Oceanic channel 11