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Gift Now or Inheritance Later
Old 06-23-2017, 05:43 PM   #1
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Gift Now or Inheritance Later

GF and I are thinking that we should start gifting some of the estate to our children and grandchildren now rather than waiting till we pass to that great lawn chair in the sky.

We have more in assets than we could conceivably spend in the next 30 years along with pensions, profit sharing and SS to top off the tank. Given that most assets are in my name we also have a federal estate tax issue. We figure that gifting now will help the kids (all employed and on their own) while they can use it given their young families and in one case a low paying labor of love job. We have opened 529's for the grandchildren but would probably ramp up those contributions to further ease the parents pain at college time.

My parents have begun gifting now as they have a state estate tax issue. None of us kids need the money but it might have come in handy when we were younger which made me think our plan might be the right thing to do.

Any experiences or thoughts that anyone has would be greatly appreciated! And no, I am not looking to adopt anyone on this forum.
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Old 06-23-2017, 05:57 PM   #2
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Kind of a delicate balance between estate tax issues, need for the funds now, your joy in seeing the funds being used now and , if capital assets, stepup in basis on inheritance vs
no stepup if you gift. Determine the weighting factors for each and get your personal answer.
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Old 06-23-2017, 06:00 PM   #3
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I agree with gifting earlier if you can afford to. We and our kids live in a HCOL area. When they are ready to buy their houses, we plan to gift the down payment. We haven't told them yet
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Old 06-23-2017, 06:07 PM   #4
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An irrevocable trust would move assets out of your estate today (especially useful if these assets have a good chance of appreciating in value in the future) while allowing you to fine-tune how the transferred assets impact your kids' and grandkids' lives. For example, income from assets transferred into the trust could be distributed annually or semi-annually to the beneficiaries, while the principal would be retained in the trust until some future date. Personally, I'm in favor of 'income supplementation' rather than 'asset windfalls', but each situation is unique.
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Old 06-23-2017, 06:11 PM   #5
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Kind of a delicate balance between estate tax issues, need for the funds now, your joy in seeing the funds being used now and , if capital assets, stepup in basis on inheritance vs
no stepup if you gift. Determine the weighting factors for each and get your personal answer.
My Mom (rest her soul), said she would rather see the appreciation for a gift rather than give it after she passes.
I sort of have the same philosophy. Our 4 sons are in their 40's and 50's, and we feel they can use the money more now than when we pass.
I am taking my RMD and splitting it 4 ways, plus I have 529's set up for my grandsons and our granddaughter.
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Old 06-23-2017, 06:54 PM   #6
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We prefer to gift now as we are able. The older we get, the more we hope to gift.

The nice thing about gifting is that amounts under $14K per person per year don't count against your estate. For a couple gifting that's $28K per individual.
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Old 06-23-2017, 06:57 PM   #7
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I have been the recipient of gifting from my parents for many years, and greatly appreciated it. I just began gifting to my sons last year; they are 30 and 31 and greatly appreciate it as well.
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Old 06-23-2017, 07:06 PM   #8
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This is like the should we still support our grown child issue. Its so individual. I will say if it will bring you joy, and your not hindering their almost full potential, then do it now while your alive. I told my wife that if one of our grandchildren want to be a poet, artist, or some other usually low paying job, id like to fund it.
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Old 06-23-2017, 07:07 PM   #9
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We prefer to gift now as we are able. The older we get, the more we hope to gift.

The nice thing about gifting is that amounts under $14K per person per year don't count against your estate. For a couple gifting that's $28K per individual.
Also, If you are gifting to a couple, each one can get $28K from the 2 of you, for a total of $56K
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Old 06-23-2017, 07:15 PM   #10
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Originally Posted by audreyh1 View Post
We prefer to gift now as we are able. The older we get, the more we hope to gift.

The nice thing about gifting is that amounts under $14K per person per year don't count against your estate. For a couple gifting that's $28K per individual.

Don't count against your estate?? Not sure what that means?
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Old 06-23-2017, 07:21 PM   #11
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Don't count against your estate?? Not sure what that means?
I believe, if you give above the $14,000 per person per year limit, the excess amount of the gift counts against your estate tax exemption. So when you die, you're only able to leave the then current federal exemption minus the aggregate "excess" amounts you've given during your lifetime.

However, you can give $14,000 per person per year without it impacting the federal exemption available on your death.
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Old 06-23-2017, 07:23 PM   #12
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I believe, if you give above the $14,000 per person per year limit, the excess amount of the gift counts against your estate tax exemption. So when you die, you're only able to leave the then current federal exemption minus the aggregate "excess" amounts you've given during your lifetime.

However, you can give $14,000 per person per year without it impacting the federal exemption available on your death.
The key thing is that you do not have to file a gift tax form if the amount is $14K or less. If it is more than $14K, the amount is counted against your exemption.
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Old 06-23-2017, 08:05 PM   #13
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The key thing is that you do not have to file a gift tax form if the amount is $14K or less. If it is more than $14K, the amount is counted against your exemption.
Note that in time if you directly pay tuition at college for someone https://www.fastweb.com/financial-ai...oid-gift-taxes it is not counted as a gift:
The same also applies to paying someones medical bill. both are not gifts in terms of the gift tax.
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Old 06-23-2017, 08:10 PM   #14
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We fund the kids' Roths at $1k to $2k per year. We play it by ear if they need a house down-payment or to repay student loans. We may leave nothing to the kids in our wills. More likely we'll leave to our favorite charities. We'd rather give to the kids while we're alive. YMMV
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Gift Now or Inheritance Later
Old 06-23-2017, 08:29 PM   #15
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Gift Now or Inheritance Later

I did contribute some money to kid's account when they were working as a teenager. This year I gave my second kid graduation money but that's also as a Roth IRA. I'm very reluctant about gifting too much. They are both hard working but I certainly don't want to take that drive away from them. I will leave some inheritance money but by then they will be old like in their 50s or 60s. Yes I have one artist kid but she is not poor, but not rich either. There is a small inheritance that I will get from my mom's house in the short term horizon, which I'm still debating whether to slowly contribute to Roth IRA every year or invest in taxable account, potentially as a wedding gift. Still thinking about it.
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Old 06-23-2017, 09:00 PM   #16
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Also, If you are gifting to a couple, each one can get $28K from the 2 of you, for a total of $56K
Sure.
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Old 06-23-2017, 09:03 PM   #17
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This is like the should we still support our grown child issue. Its so individual. I will say if it will bring you joy, and your not hindering their almost full potential, then do it now while your alive. I told my wife that if one of our grandchildren want to be a poet, artist, or some other usually low paying job, id like to fund it.
We don't have any children, so our gifts are going to siblings not much younger than I (if they haven't reached their full potential - well, it's too late anyway). We don't want them to be too old to enjoy the money either.
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Old 06-23-2017, 09:05 PM   #18
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I believe, if you give above the $14,000 per person per year limit, the excess amount of the gift counts against your estate tax exemption. So when you die, you're only able to leave the then current federal exemption minus the aggregate "excess" amounts you've given during your lifetime.

However, you can give $14,000 per person per year without it impacting the federal exemption available on your death.
Right. The key thing, is that over many years you can gift quite a lot, and you will still have your full estate exemption to pass along after death.

I figure that for a couple with more than $10M in assets, this is a good way to keep the estate from getting too large.
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Old 06-23-2017, 09:36 PM   #19
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We don't have any children, so our gifts are going to siblings not much younger than I (if they haven't reached their full potential - well, it's too late anyway). We don't want them to be too old to enjoy the money either.
Then it sounds like it will bring you joy, and not hinder their potential. This meets the BCG's requirements.
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Old 06-24-2017, 03:42 AM   #20
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I told my wife that if one of our grandchildren want to be a poet, artist, or some other usually low paying job, id like to fund it.
+1

Artists, poets and those pursuing other humanities (and I would argue humanitarian endeavors, as well) work tirelessly to create something important and meaningful. The effort expended on their craft and service to others is more than they ever will be compensated for.

But none of that matters to them. Because they’re creating art or serving those who are in need. And while the “reward” ($$) may never come, they will leave a legacy.

We live in a world that needs more than equations, explanations and bottom lines on a spreadsheet. Politics won't do it, neither will engineering, science, business, technology or finance.

The humanities allow us to see the invisible. They stir something deep within us in a way that no other experience can; providing a unique perspective and are what separates us from barbarians.

It is disappointing that these worthwhile pursuits, while invaluable to our collective humanity, generally receive little in the way of monetary compensation and are too often demeaned as lacking intrinsic value. I am encouraged that there are people like you willing to materially support your progeny in such endeavors!

Well done....
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