When to give inheritance money to your kids
Deciding to give inheritance money to your children or grandchildren is tricky. Do you wait until you die? Do you give them some money now so you can see how wisely they spend it and maybe share in their enjoyment? Our estate planning attorneys discuss these and other issues.
When to give?
In general, experts who spoke with The Wall Street Journal favor you giving away money to your children and grandchildren before you die. As one expert put it: “I’m a firm believer that too many people save every penny until the day they die, instead of spending their money now.”
In many cases, experts say, your family needs financial assistance now, and it makes little sense to wait for “the random date” of your death to decide when they will receive the money. They also point out the benefit of you being able to witness how your gift benefits your heirs.
At the same time, you may be worried about whether your gifts will be spent wisely or wasted on luxuries. The only way to find out, experts say, is to give away some money now and see how people react. That may determine the timing and amount of your future gifts. You may also want to take into account the tax implications of your gifts, including income and capital gains taxes.
The biggest factor, of course, is deciding how much money you can afford to give away without threatening your own financial security or standard of living. You should consider the possibility of your long-term health care needs, and spending down your assets so that you later qualify for Medicaid.
The pandemic and other considerations
The COVID-19 pandemic, unfortunately, has had a major negative impact on the finances of many families. One expert noted many clients who had thought in the past about making early gifts to their family members. They're following through and doing so now because they know the assistance is needed and will be appreciated. The pandemic, in effect, opened their eyes to the benefits of not waiting until they die to distribute at least some of their inheritance money.
Regardless of the circumstances, experts agree that communication is key when distributing gifts to family members. They feel it is important to have an open discussion about your finances, without going into specifics. You can tell them that you want to share your good fortune now rather than when you die. You can also make clear that they should not depend on you to bail them out of every difficult financial situation.
Are you a good financial juggler?
Deciding on when to give out your inheritance money is a delicate juggling act. You have practical considerations, such as how badly your heirs need money now and your own financial situation. These can also be emotional decisions if some members of your family are struggling while others are doing well. What are their expectations? What are yours? No matter how many questions you think you have, there are others that have not crossed your mind yet.
The estate planning attorneys at The Law Firm of Brown & Jensen in Arizona have been helping people just like you with questions and answers about their financial future since 2014. We have offices in Mesa, Tucson, Scottsdale, Chandler, Goodyear, Peoria, Payson, and Show Low — and we're ready to handle all of your estate planning needs. Let us work with you to come up with a creative, customized plan that meets your needs and accomplishes your goals. Contact us today for a free consultation.