Do you plan on leaving an inheritance to your children, grandchildren and other loved ones? If you’re like many retirees, you’ve worked hard to build a career, accumulate assets and raise a family. While it may not be enjoyable to think about your death, an estate can help you pass your legacy on to your family members after you die.
Of course, there’s nothing saying you have to wait until your death to distribute your legacy. It may be just as effective for you to give assets away to your family members while you’re still alive. That way, you can see your loved ones put your legacy to use.
In 2017 the IRS allows each individual to gift as much as $14,000 to another individual. Married couples can give twice as much, up to $28,000 per recipient. If you give more than that amount, you may have to pay gift taxes.1
Just because you can gift assets, though, doesn’t mean you should. There are valid reasons for and against gifting. Below are a few questions to ask yourself as you consider your options:
Do you have assets to pay for long-term care?
According to the U.S. Department of Health and Human Services, 70 percent of retirees will need long-term care at some point in their lives.2 Long-term care is extended assistance with basic daily living activities such as dressing, bathing, eating, mobility and more. It is often provided in the home or in a facility.
As you may know, long-term care can be costly. Care either in the home or in a facility can cost thousands of dollars per month. It’s possible that you could need the care for years. Also, long-term care usually isn’t covered by Medicare, and it’s covered by Medicaid only after you deplete your assets.
Don’t ignore long-term care as you consider a gifting strategy. You may need liquid assets later in life to pay for a facility or an in-home care provider. Be sure to consider whether you’ll still have enough money to pay for care even if you gift assets now.
Do your loved ones need immediate financial help?
An inheritance is always helpful. However, it’s possible that your loved ones may have pressing needs that they could address today if you decided to gift your assets. For example, maybe you have grandchildren who need help paying for college. Or perhaps you have grown children who are facing some kind of financial crisis, like a divorce or a business failure. If so, it might be more impactful to gift their inheritance rather than wait until you pass away.
If you decide to gift money to a loved one, be sure to consider how the gift will be viewed by your other children and grandchildren. Will they also want a gift? Will they consider the gift unfair? Think through these questions so you don’t cause any unnecessary drama or conflict.
Do you want to minimize probate costs or estate taxes?
One of the major benefits of a gifting strategy is that it reduces the size of your estate. This can be helpful if you’ll face probate costs or estate taxes. Probate is the legal process for settling one’s estate. It includes time-consuming and costly administrative tasks such as paying debts, filing taxes, notifying heirs, selling assets and more.
Estate taxes usually only apply to very large estates. However, if you own a business, substantial property or a sizable amount of investments, you could face estate taxes. Gifting assets during your lifetime will reduce the amount of assets that are vulnerable to probate costs or estate taxes.
Ready to develop your gifting strategy? Let’s talk about it. Contact us at First Fidelity Group. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
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.
17105 - 2017/10/30
First Fidelity Group
With more than 39 years of experience and knowledge, we've seen it all. We understand each client is unique and faces different challenges.