The Case for Early Inheritance

Who says you have to die to let your loved ones enjoy the fruits of your labor?

Most studies show people are much happier giving than receiving. Why should the largest giving event of your lifetime happen when you are not around to enjoy it?

Recently, my wife and I decided to send our twin sons to a private school. This decision was not taken lightly and we considered many factors before taking the plunge.

One obvious point was why are we paying $16,000 in property taxes for the right not to use public education?

Another consideration was the friends they have had since kindergarten, who will not be joining them.

Despite these reservations we decided to sign a pretty expensive contract (for us).

Maybe I am just rationalizing things but I view this as early inheritance.

Yes, if we just let this money grow and received market returns, they might be left with a ton of money in 2050.

Sometimes you have to throw the compound interest stuff out the window and focus on things no one can put a price on, and do real financial planning.

As far as the compound interest goes, who says they will be able to handle this responsibility? More importantly, we might not be around to guide them.

In our practice, we have plenty of clients who have worked their fingers to the bone accumulating enough money to alleviate any financial worries in their retirement.

Unfortunately, their biggest concern is what their children will do with the windfall they will receive at some unpredictable time.

This is a good problem to have; but, you would be surprised about how many wealthy people agonize over it.

We decided that the benefits of this school will hopefully last a lifetime. Even though they might not inherit as much money, they will have a better chance to acquire the skills so they will be able to support themselves.

We look at this as our own version of factor investing. We believe that this investment has a chance to provide a much greater return than any mutual fund packed with small, undervalued companies. We have decided to overweight this in our portfolio.

We are not sending them to this school so they will be able to get into an Ivy League University or go work for Google.

There is something much more valuable to us than this: character.

No matter how much money you make, a character fault will get you in the end. The list is endless of those who made millions than lost it all because of greed, dishonesty or some other negative trait.

The school we are sending them to has a motto that places character first.

Students are assigned an unpaid job on campus; wear a jacket and tie; and attend a non-denominational chapel, daily.

Detention is served at 7:30 on Friday evenings; no iPhones allowed.

35% of the school’s population comes from foreign nations. There is no gym class, but students must play three sports during the school year.

We have met several graduates of the school and they seem to be polite, respectful and mature beyond their years.

I have nothing against public education, but we look at this as an investment decision and would simply like to receive the highest return possible on our money.

I have no idea how this will all go down. It may turn out to be an awful mistake.

What I do know is I would rather be alive when my children receive some of their inheritance. I also want them to be best prepared to handle the rest of it whenever that day comes.

Our belief is this school, along with our guidance, will give them the greatest chance to find a career they will enjoy, be a good person, and have a happy life.

We feel raising children that are kind, honest, empathetic towards others, and altruistic is much more important than becoming self-obsessed valedictorians of their class with 104.5 averages. Doing charity work should mean much more than having something to tack on to a resume.

Like all good investment strategies we will not see quick results. There will be ups and downs. Sticking to the strategy and plan is what is most important. Process always overrides short-term outcomes.

We feel providing the best education both inside and outside the home will prepare them to make better decisions regarding any choices they will face in the future, including managing their money.

Considering some form of early inheritance for your children may make sense for you. We decided it did for us.

Your choice does not have to include private school. You may feel helping your child start a business or simply taking family trips while you are still able will provide more value than an inheritance that requires your death.

The choice is yours. Just remember one thing:  Your children may receive more by you leaving less.




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