Many couples think about the possibility of giving their children their inheritance early. In fact, about 67% of people older than fifty would prefer to pass on their assets early, rather than make their children wait until they are gone. The motivation is easy to see: individuals can see how their generosity helps their children while they are still around to witness it. If you are one of these people, here are four things to think about.
Giving an Early Inheritance
1. Keep the tax codes in mind
How the tax code is currently set up, the IRS treats your money the same, regardless of whether you give it away now or later. Only if you are giving away more than $5.45 million does timing possibly become a consideration. You can even give up to $14,000 per person per year without incurring gift taxes. If you have specific medical needs or educational goals, there are other ways to fulfill these goals. An estate planning attorney can help you decide which strategies are best suited for your situation.
2. Gifts that keep on giving
Assets that increase in value is a great possible gift to your children. A home or company stock is an example of property that often increases in value over time. Gifting, or helping to purchase, one of these items is really a gift that keeps on giving and helps your children develop greater wealth faster in the future.
3. One size does not fit all
In a previous blog, I talked about how fair estate planning is not necessarily equal treatment. Do not let yourself feel pressure to give the exact gifts to all of your children. Each has different capabilities and often different needs. A child may prefer to wait, another may want a home, another may want help to start a business, and you may not even trust one or more of your children. You did not treat your children the same as you raised them, and what – and how – you gift to them should be a continuation of your parenting style. If you do this, you should communicate well to help prevent hurt feelings or misunderstandings.
4. Do not touch your own retirement
If you do decide to gift an early inheritance, you should still not use any money that you have earmarked for retirement funds. You do not want to gift away too much and then rely on your children to take care of you if your retirement funds do not last long enough.
Final Thoughts
Gifting is a delicate balance, but you can decide on the best strategy by coordinating with your financial advisor and estate planning attorney. Making careful and informed decisions can help you enjoy early gifting to your children and can be fulfilling for everyone. Contact The Rains Law Firm or schedule a meeting to discuss life-time gifting.