Pass on the wealth
Okay, writing your will is obvious. But what are you going to give now?
NEW YORK (MONEY Magazine) - Leaving a legacy typically conjures up images of pinstripe-suited lawyers in mahogany-paneled offices drawing up estate plans.
And, indeed, at a minimum, you need a will to make sure the assets you leave behind go to the people you want to have them.
You may consider talking with an estate-planning attorney about setting up trusts as well, particularly if the assets you leave may be subject to estate taxes.
(For now, the first $2 million you leave is exempt from estate taxes, and that limit is scheduled to rise to $3.5 million in 2009; then disappear in 2010, only to be reinstated at $1 million in 2011.)
But leaving a legacy isn't just about having the right estate-planning documents, and it doesn't have to involve an outright transfer of cash or assets.
Last year, for example, to celebrate their 50th wedding anniversary, Dave and Ruth Frederickson rented a house on the island of Oahu and paid for their children, spouses and grandkids - 18 in all - to join them for a week of swimming, snorkeling and hanging out.
The tab topped $20,000, but the Fredericksons consider it a gift to their family.
"We still hope to pass along an inheritance," says Ruth. "But how often do you get a chance to spend this kind of time with your family? I'd rather spend the money now when we can enjoy it than leave it all for later."
There are other benefits to giving away some of your money while you're still around. In addition to shifting money out of your taxable estate, you have more control over how the money is used.
Contribute 10 grand to a grandchild's college savings account and you know your largesse is funding an education that can pay dividends down the road. Leave a $10,000 cash gift in your will and, well, it could end up funding a rowdy road trip.
How to start the conversation
It's fine to ask your parents whether they've written their will. But a deeper discussion about the older generation's financial legacy is one they should probably take charge of. So if you are the parents, talk to each other before you talk to your adult kids.
Ask yourselves: Would you prefer to leave money to your family in your will or help out now, when you can watch them put the money to good use?
Can you afford to do both or will your own finances suffer?
Once you know how you'd like to proceed, talk about your plans with your children. If you'd like to gift some money now, ask them what would help them most. Maybe you thought you'd help your grandson buy his first car, but it turns out his parents could really use a hand with his tuition payments.
And let everyone know the contents of your will, especially if anything will surprise them. You don't want to be the inadvertent cause of rifts in the family after you're gone. In the end, these discussions about how the wealth accumulated by one generation can benefit the whole family may be even more important than the most rigorous budget or the smartest investing strategy.