Ducks in a Row

Personal finance goes beyond an annual meeting with a wealth manager or contributing funds to a savings account. Oftentimes it is a culmination of lifelong experiences containing seemingly insurmountable pitfalls and heartening triumphs. Setting goals and striving to achieve them plays a pivotal role in shaping such experiences. Conversations about basic money skills between parents and their children may have a major influence on their future financial behavior. This three-part series takes a more personal look at events throughout different stages in life that may be used to reflect upon the importance of laying a solid foundation for financial success.

Part three of a 3-part series about a financial life journey

Trevor Scheid, CFP® – Senior Client Associate

Part 1: It started with a piggy bank
Part 2: Seizing opportunities

Planning for retirement and the golden years 

Ducks in a RowThe age of retirement was on her horizon, but Penny first needed to figure out how to sell her company. Her exit strategy was straightforward: If she sold the company outright, the fate of her current employees would rest in the hands of the new owner. Her dedicated team of engineers helped grow the firm to where it was. It seemed natural for them to take over ownership and carry out Penny’s legacy.

Establishing an employee stock ownership plan would accomplish this goal and would also provide Penny with a stream of income as her shares were bought out over time (assuming the company continued to sustain itself). Proceeds from the sale would also receive preferential capital gain treatment instead of being taxed as ordinary income to Penny.

Family Planning

Penny’s financial advisor informed her that the proceeds from the sale of her business, along with the assets she had accumulated and saved throughout her working years, left Penny with a taxable estate well above the $5.49 million exclusion. Together, they discussed steps Penny could take to possibly reduce her estate below the exclusion and also help her family members. The following plans were put in place:

Annual Gifting to Family

Penny had two children, each married with 1 child. If Penny gifted up to the annual gift tax exclusion of $14,000 per family member, she could transfer $84,000 to her family each year without any tax consequences. She didn’t want her grandchildren to have access to the funds before they were adults, so she worked with her estate planning attorney to set up irrevocable gift trusts. These would allow Penny to move assets out of her estate and help prevent the grandchildren from using the gifts irresponsibly.

Intrafamily Loans

Penny helped her children purchase new houses by providing loans to them. The key applicable federal rate was more than one percent lower than mortgage rates they could secure at a bank. Additionally, the interest paid would eventually be going back to the children since they were beneficiaries of Penny’s estate. Loans could also be used to help her entrepreneurial grandchildren one day start their own businesses.


Penny loved the idea of setting up a Donor Advised Fund, which allowed her to determine which charities she would like to donate to. She met with her grandchildren to have them research charities and causes that they wished to contribute to, much like Penny’s parents had done with her. Contributions were also flexible, so Penny could review her estate each year with her financial advisor to determine how much she would gift to the fund while still having enough to sustain her lifestyle and leave assets to her heirs.

Enjoying Life

Penny thought about what to do with her free time. She dreamt about retirement and planned for it throughout her life. Actually living it was a different story. Work had consumed much of her life, and now she finally had time to spend with her twins and their families, learn new skills, and give back to the community.

Penny’s grandchildren lived close by, so she was able to schedule routine family outings to make lasting memories. Attending cooking courses, art classes, and a local choir helped Penny to meet new people as well. Charitable giving, beyond the financial, was important to her, and she made an impact by volunteering her time.

End of Life Planning

Penny didn’t want her children to have to provide care for her as she grew older. She enjoyed the comfort of her home, but also valued the potential benefits of community, social interaction, and skilled caregiving that assisted living facilities had to offer. She proactively toured various senior living facilities to find the best fit for her when the time came.

Penny was aware that inheritance often caused strained relationships between family members. To avoid this from happening to her family, Penny brought her twins to meet with her financial advisor. She wanted to make sure that her children understood her wishes and were able to prepare for their inheritance.

After Penny passed away, her children continued to hold family meetings to discuss which charities they would donate to from the Donor Advised Fund. As they were clearing out Penny’s personal belongings, they found a pink piggy bank in her attic and broke it open to see what was inside. There were no vintage coins, cash, or stock certificates — just a note in Penny’s handwriting that said, “This little bank set the course for me to live the life I imagined.”

Trevor Scheid, CFP® – Senior Client Associate

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