In my broader family, an issue that’s come up for recent discussion is about parents gifting their children money before they die instead of leaving it until after they die. As you can imagine, it’s a thorny issue.

The parents reflexively believe that the money should be given through inheritance after they pass away. The children, or at least some of them, think the money would be of more value if it were given to them before that time. To them, it would be more compassionate, and might also avoid any quarrelling between the children after their parents’ deaths.

The issue doesn’t make for pleasant dinner table conversation but it’s one that’s likely to be aired more often as Baby Boomers in Australia get older, die richer and leave behind larger bequests. The Productivity Commission says Boomers – those born between 1946 and 1964 – are expected to pass on an estimated $224 billion each year in inheritance by 2050, a fourfold increase in bequests.

The question for many parents is whether to make their children wait for their inheritance or not. Today, we’ll go through the pros and cons of the issue, as well as the legal and tax implications.

My family discussions on inheritance have coincided with the reading of a book by a former fund manager, Bill Perkins, called Die with Zero. As the title of the book implies, Perkins believes all of us should aim to die with nothing in our bank accounts.

Why? Because for him life is about having experiences rather than accumulating money.

“Those are two very different goals. Money is just a means to an end: Having money helps you to achieve the more important goal of enjoying your life. But trying to maximise money actually gets in the way of achieving the more important goal.”

By aiming to die with zero, Perkins thinks you’ll forever change your autopilot focus from earning and saving and maximising your wealth to living the best life you possibly can.

“Why wait until your health and life energy have begun to wane? Rather than just focusing on saving up for a big pot full of money that you will most likely not be able to spend in your lifetime, live your life to the fullest now: chase memorable life experiences, give money to your kids when they can best use it, donate money to charity while you’re still alive. That’s the way to live life.”

Perkins outlines nine rules for achieving the aim of dying with zero.

Rule 1: Maximise your positive life experiences. 

Perkins reckons you should start thinking about the life experiences you’d like to have, and the number of times you’d like to have them. This will get you to focus on meaningful and memorable experiences.

Rule 2: Start investing in life experiences early.

If life is the sum of your experiences, then everything that you do in life adds up to who you are. Yes, you’ll need money to survive in retirement, but the main thing you’ll be retiring on is your memories. Therefore, Perkins thinks you should invest in life experiences, and start as early as you can.

Rule 3: Aim to die with zero.

Perkins says that though you may not succeed in dying with zero, that should be your goal. “People who save tend to save too much for too late in their lives. They are depriving themselves now just to care for a much, much older future self – a future self that may never live long enough to enjoy that money.”

Rule 4: Use all available tools to help you die with zero. 

Perkins addresses the fears of many people that they’ll run out of money before they die. He thinks if that’s a concern for you, then you need to investigate various tools including annuities – financial products that offer a guaranteed income stream.

Rule 5: Give money to your children or to charity when it has the most impact.

Perkins says the peak utility for money – the time when it can bring optimal usefulness or enjoyment – is around 30 years of age. Yet, the average age for inheriting money is close to 60 for Americans and 50 in Australia.

“Putting your kids first means you give to them much earlier, and you make a deliberate plan to make sure what you have for your children reaches them when it will make the most impact.”

Rule 6: Don’t live your life on autopilot. 

Perkins isn’t saying that you shouldn’t save for the future. Instead, he’s saying that it needs to be balanced with spending on the present.

He makes a good point that many experiences depend on your physical health. If you’ve been biding your time to go on that hiking trip, it’s best to do it now rather than later.

Rule 7: Think of your life as distinct seasons.

To get more out of the present, Perkins advocates dividing your life into time buckets. That is, draw a timeline of your life from now to the grave, then divide it into intervals of five or 10 years. Think about the key experiences – activities or events – that you definitely want to have during your lifetime.

Rule 8: Know when to stop growing your wealth.

Often, your net worth peak – where it’s the highest that it will ever be – happens well before retirement. Perkins believes that’s the time to start spending down, or de-accumulating. 

Rule 9: Take your biggest risks when you have nothing to lose.

Perkin’s view is that you’re better off taking more chances when you’re younger. You’re less likely then to let irrational fears get in the way of making choices that reflect your priorities.