Is an Early Inheritance Right for Your Family?

​Are you starting to think about your legacy and how best to pass your hard-earned assets on to the next generation? You may think that your legacy is something that is distributed after you pass away. However, the idea of early inheritance, or gifting money before death, is growing in popularity. In fact, according to a study from Merrill Lynch, nearly 60 percent of those age 50 and older say they would prefer to give assets to loved ones today rather than in the future.1
 
Fortunately, the IRS allows you to gift assets to your children, grandchildren, or just about anyone on an annual basis without facing gift taxes. Individuals can give up to $15,000 per year to each recipient while married couples can gift as much as $30,000. Also, gifts don’t count toward the exclusion if they’re used to pay for tuition or medical expenses.2

If you’re considering early inheritance, you may want to meet with a financial professional to develop a strategy and see how it fits with the rest of your plan. Even if you’re not in danger of hitting the gift tax threshold, there are still important points to consider. Below are a few questions to ask:

What kind of impact could an early inheritance have for your family? 
One of your main motivations for giving an early inheritance may be that it’s needed urgently now. For instance, maybe you have a grandchild heading to college who could use his or her inheritance for tuition. Maybe you want to help a grown child fund retirement or overcome financial challenges.
 
An early inheritance also gives you the benefit of seeing your assets put to good use. Although it may feel good to know that your family will receive a windfall after you pass away, you may find it more satisfying to see how they use that money while you are relatively young and healthy.

Can you afford to give an early inheritance? 
Before you start writing checks, be sure that you won’t need the assets in the future. You may think you have plenty of money to fund your remaining years. However, there are potential costs in retirement that may cause unexpected challenges. Fidelity estimates that the average couple will need to spend $280,000 on health care in retirement.3 The U.S. Department of Health and Human Services estimates that 70 percent of retirees will need long-term care, which can often cost thousands of dollars per month.4 If you haven’t addressed these risks, you may want to do so before you implement a gifting strategy.

Are there any personal or family issues to consider? 
Finally, consider what kind of issues your gift may have within your family. While your gift will almost certainly be welcome, there could be underlying issues and feelings that you haven’t considered.
 
For example, have you provided financial help in the past to children or grandchildren? Will other children feel that the gift amount is unfair? Are there children or grandchildren who may not be able to handle the responsibility of a large windfall?
 
These are important questions to consider. You want your gift to have a positive impact, not create conflict and tension. If there are risks associated with your gift, you may want to consult with a financial professional to develop a strategy.
 
Ready to create your gifting plan? Let’s talk about it. Contact us today at DSM Financial. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.
 
1https://www.ml.com/articles/why-make-your-heirs-wait.html
2https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
3https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs
4https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
18274 - 2018/11/27

---