Lake Tahoe Attorney Blog

1Aug, 15

When you’re considering leaving money for your heirs there are a lot of questions you’ll have to address first. When the time comes to leave a monetary gift timing is everything. So, you might be asking yourself should I wait until I pass away to leave a gift? Or should I give it to them sooner?

Below we’ll answer these questions, and cover the unique taxes that will incur based upon your decision.

Gifting Heirs Money Now

There are certain advantages to giving your heirs money before you pass away. For instance, you’ll be able to see them enjoy their money and see your gifts in action. You’ll be able to see how big of a difference the gift makes in their lives. This enjoyment you’ll receive can be a large reason people decide to make gifts earlier, rather than later.

You can also advised them on how to spend their money, and the best way to make it last. Sure, you can add certain stipulations your will. But, this can’t replace actual in-person guidance.

You also have more control over how the gift is going to be spent. For example, instead of gifting direct cash, you can purchase something for them. You could pay for their wedding, or put a down payment on a house, or pay for their college education. Rather than leave the spending of the gift up to your heir.

If you give your heir a gift up to $14,000 then you’ll be exempt from the gift tax, which leaves more money for your heir.

Overall, if you’d like more control over the direction of your monetary gifts, then gifting while you’re alive might be the best route for you.

Gifting Heirs Money After You Pass Away

However, there are also certain advantages to giving once you’ve passed away. For example, you might incur unforeseen expenses that you might need the money for in your lifetime. You’d hate to sacrifice your hard-earned retirement, because you chose to gift money to your heirs early.

You can’t take money back you already gifting. So, by waiting until you pass away you’ll be able to adjust the gift amounts accordingly during your lifetime. If one of your children continues to make poor choices you can disinherit the child, or leave them with a lower gift. If you’re prone to changing your mind, or want to ensure your gifts end up in the right hands then waiting is always a good choice.

By waiting your heirs will be older, and hopefully wiser. This will ensure your gift gets spent more wisely, instead of on more frivolous items.

Estate and Gift Tax Breakdown

When considering the size of your estate, and the total amount of your gifts you’ll want to take into account the taxation that might occur.

1. Gift Tax

Gift tax is imposed on any transfer of property with no compensation in return. You’re exempt from the gift tax on lifetime donations up to $5.34 million, but anything over that can lead to a 40% taxation.

However, as mentioned above you can also gift up to $14,000 to an individual every year without going into the exclusion.

2. Estate Tax

Estate tax occurs on any trader of property within your estate after you pass. This is decided by taking your gross estate, and subtracting any deductions. This total amount is then added to any taxable gifts you have given throughout your lifetime to find your total taxable amount.

If you want to ensure your estate is well managed, and your monetary gifts go exactly where you wan them to go, then get in touch with our estate planning professionals today.

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