“For people who need their assets to generate income and have to take withdrawals, the bucketed approach works very well,” Aaron Cirksena of MDRN Capital writes in Kiplinger, recommending that retirees have three buckets: one for short-term needs, the second for medium-term needs, and the third for long-term needs. Assets in the third bucket, he explained, can be invested aggressively in the stock market, with the intention that retirees allow fifteen years before tapping into that portion of their retirement assets.
Might that same “bucket” approach apply to estate planning?
“Beyond retirement, estate planning is one of the most important and complicated financial decisions a person can make, made even more difficult by the emotions driven by contemplating one’s own mortality,” ThinkAdvisor concedes. At our Indiana trust and estate planning law firm, we think of life as a journey that starts and ends with family, knowing that dynamics result in challenges and fears in the planning process. When it comes to estate planning, “bucketing” involves thinking of heirs’ needs at different stages in their lives.
Through your will or trust, you may arrange for assets to go directly to one or more beneficiaries (a sort of short-term “bucket”). Bequeathing your home to your son? The trustee can either draw up a new deed or sell the house and give your son the proceeds. Alternately, your trust can include a conditional bequest “bucket”, specifying that something needs to happen before those heirs receive assets from the trust, perhaps reaching a certain age or graduating college.
Often family business owners choose to place stipulations on bequests of shares in the business, wanting to facilitate a seamless transition of ownership and management, Matthew Erskine writes in Wharton Executive Education. However, he warns, putting conditions on bequests too heirs can spark litigation and harm family relationships. At Geyer Law, we understand the importance of creating thorough business succession plans, but even when there is no family business, we try to bring together family members of different generations to share values and wealth transfer strategies.
It is our firm belief that big conversations about money and estate planning need to take place between – and among – grandparents, parents, and children. “Bucketing” is just one tool that can be used in organizing one’s affairs, but it is “talking over” the decisions that makes that tool work.,
– by Cara Chittenden, Attorney with Geyer Legal Group, PC
