Financial professionals don’t like it. But if you’re doing everything you’re interested in doing at the current level of retirement spending, there’s no reason to put in the time and effort to spend more.
There’s no shame in leaving a bundle to your heirs or charitable beneficiaries. That’s not being “the richest guy in the graveyard.”
intercst
If that’s the plan and reality, there’s also something to be said for giving at least part of it to them while you’re alive. That way you at least get to see some of the good or enjoyment your money makes possible.
There’s a big gap between “dying with zero” and being “the richest guy in the graveyard”. Somewhere within that gap sits a pretty good sweet spot of “enough to live the life you want, while helping those you care about.”
Regards,
-Chuck
THIS 
About 13 years ago, the daughter made it clear that she expected no help with her wedding as we’d “given her a wonderful childhood and education”. A parent would die rich with these words ringing in their ears…
Over 2 1/2 years post separation, and 18 months post divorce, we’re closing in on the $1mill mark in spending (dh and me, that is)…combo of legal bills and big sums in the beginning shoring up the business in the aftermath of his theft and embezzlement. FWIW…legal bills aren’t going to stop with his post divorce abuse, but the hospital has turned the corner from near bankruptcy and we’re now planning on what to do with/how to handle the repayment money 
.
I don’t think TMF would’ve had a strategy to help prepare for this index the old days…or would have anything to offer moving forward (I did pull the idea of “promissory notes” to accompany the gobs of $$$bucks early on…that must’ve come from the Fool)
Yes, folk…family/divorce lawyers really is the legal professions dirty little secret.
Thanks for the reminder, Chuck
Two elderly couples in my tiny Jewish congregation are facing the same tragic problem: the wife is sinking into dementia. All involved were very bright in their prime. Both couples are well-to-do and live in beautiful homes.
A neighbor faced a similar problem but in this case it was the husband who got Alzheimer’s disease and recently died after a fall in memory care.
I visited one of the couples the day before yesterday. The husband (75) is a brilliant Jungian psychologist and musician. The wife (80) had torn her Achilles tendon out of her heel bone and spent 11 days in the hospital, followed by several days in memory care. She is in a boot because she was deemed too risky for surgery. She was ejected from memory care. (I don’t know why.) She was sent home with her husband who hired a young woman caretaker.
Normally a charming, loving person (though recently incoherent) she was apathetic. The caretaker helped seat her.
I began to sing “Lean on Me” and the husband brought out his guitar. We sang uplifting songs for an hour. Finally, the husband sang an original love song looking into her eyes, his voice breaking. Near the end, the wife hummed a few bars of harmony. Tears were running down my face.
Yesterday, I e-mailed the husband to ask if my visit was too tiring for her. He said that she is back in the hospital.
We all have to be aware of the potential for needing care for ourselves (and potentially family members) as we age. Although acute care is covered by Medicare, long-term care is not. Married people can take care of each other to a certain extent, but caregiving is unbelievably stressful and there’s the potential of both needing care at the same time. Caregivers are paid by the hour even if they live on the property so round-the-clock care needs at least 4 people (which covers holidays).
Young people don’t appreciate the difficulty of caregiving. People with dementia may become incontinent. (A neighbor has this situation with her mother-in-law.) They may become belligerent. They may wander.
Single people have to build a safety net for themselves. This is doubly true for a disabled person, like my double-amputee friend who died at home. He had twice previously fallen in his house away from his phone and only a coincidental visit from a friend found him after many hours on the floor.
Personal care is very, very expensive. TMF’s trenchrat wrote that money “melts away like ice cream on a Florida sidewalk” when he got cancer. He died before he needed years of extended care.
My trust leaves a bundle to my heirs but only after taking care of myself and DH. People who advise giving away significant amounts of money while relatively young and healthy are either very, very rich (enough to spend many hundreds of thousands on elder care with plenty left over) or not aware of the potential cost of getting old. This is like donating a kidney when you’re healthy and don’t know if you will develop a problem in the other kidney later.
I’m very upset about the tragedy of these people, who are all so fine and worthy of a happy ending which will not come. I can easily visualize a similar situation for my husband and myself.
Wendy
The key phrase there is “relatively young.” A somewhat realistic case for the “give some of it away while you’re still alive” is more like someone who built their retirement plans on something close to the 4% rule and ended up retiring in a “typical” market rather than a strained one. If that someone retired in their 60s with what looked like “just enough”, they may wake up in their 80s with twice what they had when they retired. Around that time, they might find themselves slowing down on personal consumption while having more than enough in “surplus” to cover even a five-year nursing home stay.
All it really takes to get there is a fairly standard, fairly conservative retirement plan and the fear of spending beyond that plan until it gets to the point where the person regrets not spending earlier. Add in a “paid off house” that shifts from “place to live” to “source of nursing home funding” (because the person can’t live in it independently anyway), and the path becomes feasible for even more people.
Regards,
-Chuck
If you wander into estate tax country, the usual advice is spend it down, give it away, or get ready to pay the tax.
Turns out this is not so easy. The iRs has limits on everything.
Can you imagine spending a million dollars on a cruise?
Yes, you can move assets to an irrevocable trust but it reduces your estate tax exemption. So effectively you pay 40% tax on those funds.
Gift tax exemption is limited to $19k per person per year. Excess reduces your estate tax exemption. Again taxed at 40%. Tough to give away a million this way.
Charitable donations have deductibility limits based on agi. 30% of agi is the limit for stock donation.
Makes no sense to donate when not deductible. Better to pay the tax and let heirs keep the 60%. But donating the agi max each year looks like one of your best choices.
Charitable remainder trust can be used to reduce estate tax. People say not as attractive as other choices but can be used if structured carefully.
Billionaires have not paid estate taxes for decades largely because Congress stopped closing tax loopholes in 1990. This is the first summary I could find on short notice, but there are more detailed analyses by a Columbia University estate tax attorney out there somewhere: More Than Half of America’s 100 Richest People Exploit Special Trusts to Avoid Estate Taxes — ProPublica
Thanks. Your article is a bit out of date. Current estate tax exemption is $15MM for singles and $30MM for married couples. That was from Trumps earlier tax law and about to expire. Now renewed under his big beautiful tax law (and increased from $13.99MM.
Yes, trusts are out there and available to all. Assets in the irrevocable trust can grow free of estate taxes. They do pay income taxes on income like dividends and capital gains.The tax rate paid is often very high compared to individual rates.
The article is incorrect on putting assets in the trust. They are treated as a gift and subject to gift tax. Up to $15MM, you deplete your estate taxes exemption. Above that you pay 40% or more gift tax. They can be very attractive if you have stock options that may have low value when transferred.
Billionaires have foundations that are taxed at a very low rate. Last I knew, 4% on capital gains. These tools are for multigenerational planning.
The loss of my father to a fall has all sorts of aspects to his care after the fall. The four of us, Mom, sisters, and I, were very dedicated to his care. We had the gift of him for another three months. The costs were minimal because the time frame was so short. Medicare picked up a huge bill. He had supplemental care. He had long-term care. The home care from December 19 to January 10 was a short period of coverage.
Dad was never the same after his fall. He would have wanted to go. If he had survived, he would have been in a nursing home. He really would have wanted to go.
The long-term care insurance was bought before his will was written. The coverage was to the “xyz estate of”. We can not cash the checks. The insurance representatives are taking their bloody time changing the name on the check to the “trust of”. This money goes to my mother.
I miss him.
An older woman in a restaurant yesterday assumed I was Jewish. Partially true. Her demeanor was NYC Jewish. She had been adopted. She had her DNA tested and is Northern Italian. We compared her mother to my Dad. Really, he was like his mother. The two(her mother and my dad) of them were cut from the same cloth. LOL Tough, strong, honest, generous, and interfering. Warm, social, and caring. Difficult.
@pauleckler while you are focused on federal estate tax, remember that each state may impose its own estate tax that can differ from the federal tax.
Each of us needs to separately investigate our own state death tax situation. Trusts may be included in the state death tax where the federal tax would exclude them. And the state estate tax exemption may be much lower than the federal. And the tax rate may be exorbitant.
Wendy
If I am also subject to the federal estate tax, then yes. I plan to spend as well as give away all of my wealth. The kids will get any property and any life insurance.
Unless of course, your reason to donate is for the benefit of others and not yourself. No one gets a tax deduction on their charitable volunteering (sweat equity).
Melinda Gates is a hero.
Hawkwin
Who is spending his time preparing for his third act - giving back and spending down.
True. But remember that inflation in services is much higher than inflation in goods. The paid off house may not cover the nursing home stay if that trend continues - which it probably will, given the low birth rate and expulsion of immigrants.
Wendy
In February I got my mother to go to cash. She would otherwise have been in bonds and some equities. The bonds would be at a discount now.
While she loses for a period of time to inflation, she can invest much safer on the other side of this mess.