Gifting vs Inheritance

[audreyh1]

But get even more immediate benefit by gifting to a qualified charity instead of relatives.

I've given up trying to reduce the estate or taxable income. It's just running away from me.

Yes, I had already edited my above post to include tax benefits of charitable gifting. You can use a DAF as well as giving directly to a qualified charity. It’s a very nice way of donating highly appreciated securities.

Wow, estate value running away from you - I guess that’s a first world problem! But we are still working on reducing our estate and taxable income.

 

[timbervest]

We gift up to the limit each year to DD and DS and no issues. One is much better off financially than the other but we give evenly. Both are the only beneficiaries. Estate likely to be good sized when we finally pass and we expect to gift some portion of that before we die so that they will have the benefit of it prior to their old age (in case we live to be 100).

DAF is our charitable strategy and has been for years.

 

[Midpack]

I would let BIL lead first in any wealth transfer / gifting. Not your kids.

Agreed. If DW and I come to an agreement, we will get BIL’s approval before any gifting to his son and daughters. He may nix us, really don’t know. I know he does believe in working hard for FI, as we both did ourselves.

 

[Midpack]

We have gifted up to no more than the max of the exemption limit to our kids for the last several years. We sometimes gift less so they don’t bake it into their budget. So you can gift this year and see how it goes and then do it again, or not, in the future. The first year we did cash before we realized what a pain that was for us, now we gift appreciated stock directly to their brokerage. You could require that they set up a brokerage account somewhere so there would be a greater chance that they save some if it.

All the nieces and nephew already have brokerage accounts, and seem to have good financial habits, thanks to their Dad - my BIL.

 

[VanWinkle]

We don’t have kids. Our estate will be left to one BIL and our nieces and nephews. Who knows what our estate will amount to when we’re gone in 20ish years, but today the amounts would be very substantial. The odds of us running out are remote.

The BIL has a greater NW than we do, so he doesn’t need the money - but he’s our successor trustee/executor. The nieces and nephews are financially all over the map, one who’s already amassed quite a bit in his mid 30’s, one without a penny to her name in her mid 50’s, all the others are doing OK but probably moving toward FI very slowly if at all.

I think we should gift the maximum tax free amount each year ($19K?) to some nieces and nephews now while they can really use the money, not just a large lump sum in 20ish years. [Please leave why “some” out of the this discussion] I don't care to know what they do with it. There won’t be any added tax consequences for us or them. There is no real danger we’ll come up short financially by gifting now. And we’d stop if our picture changes radically in the years ahead.

DW is adamantly opposed. She won’t say exactly why, but I think she’s afraid they’ll take it for granted and/or it will impede their financial discipline - and neither of us had any financial help from our parents as adults. And she’s convinced most of them talk to each other regularly, so if we don’t gift equally among them, it could cause friction - that’s not completely lost on me. And I think DW is subconsciously afraid we could run out ourselves in the many years ahead.

Odds are they’re all going to receive substantial lump sums when we pass, with our without gifting.

Surely others here have grappled with warm hand vs cold hand. What made you choose to gift while alive or not?

I have the same situation, but have started with a lower amount
and will increase it as I age and know my money will outlast me.
That may help get DW on board in your situation.

 

[pacergal]

All the nieces and nephew already have brokerage accounts, and seem to have good financial habits, thanks to their Dad - my BIL.

Then I would choose to gift equally. But maybe start slow as others have stated. Gift once, see what happens (once DW is on board). My biggest thing is to hear a Thank you.

We have gifted smaller amounts ($5-10K) occasionally. It is well appreciated now. DD is a stay at home mom and DS does not earn much as a teacher.
I don't care how they use it, save or spend. Once given, it is out of my hands. And that's OK.
I assume, but don't know, that they are using it for bills and cost of living at this point. They both have some savings, DD an IRA from previous work, DS in the beginnings of a pension program from work.
Both kids respond with much appreciation.

 

[Taco]

DW is adamantly opposed. She won’t say exactly why, but I think she’s afraid they’ll take it for granted and/or it will impede their financial discipline...

With regards to taking it for granted, one suggestion is to make it very irregular. Do not give it at Christmas or on a birthday.

At some random time, say something about selling a stock or about having a large IRA withdraw, and that you wanted to share some with them. Then perhaps 16-18 months later, do it again but a different amount.

If it all seems very random and unpredictable, they probably won't plan on it or even expect it to continue. And that would most likely not impact their current financial behavior.

 

[audreyh1]

So all these nieces and nephews are in one family? Your BIL?

Can you discuss gifting ideas with him if they are all his children?

 

[Car-Guy]

Surely others here have grappled with warm hand vs cold hand. What made you choose to gift while alive or not?

At least I get to see my money doing some good.

 

[youbet]

To reduce the estate overall. Also to reduce the taxable investments which generate taxable income.

I easily achieve that with an ongoing string of stupid investment decisions. I can take any size FIRE portfolio down in no time at all. Why gift when you can just be a geezer prone to brain farts?

When I'm done here, it's back to the Schwab site to see what I need to do to qualify for Medicaid and subsidized housing!

 

[Kings over Queens]

At least I get to see my money doing some good.

Pretty much how I feel about it.

 

[audreyh1]

I easily achieve that with an ongoing string of stupid investment decisions. I can take any size FIRE portfolio down in no time at all. Why gift when you can just be a geezer prone to brain farts?

When I'm done here, it's back to the Schwab site to see what I need to do to qualify for Medicaid and subsidized housing!

Well that’s certainly another way to do it!

You can also reduce the size of your estate by spending more aggressively. We are doing that too.

 

[NCMom]

It doesn't sound that you are all that excited about giving money to these nieces and nephews. I would probably find charities in the area where you could make a real difference in people's lives. Unless of course you are already doing that.

 

[audreyh1]

Surely others here have grappled with warm hand vs cold hand. What made you choose to gift while alive or not?

At least I get to see my money doing some good.

We’ve been more focused on gifting while alive because our beneficiaries are siblings who are only a few years younger. And they certainly can use it.

 

[lakerunner]

My parents did something similar: They helped out 4 of the 6 grandkids as they were starting out. Those 4 were all the children of one of my sisters. She was divorced and fighting cancer. I had no problems with this at the time. They needed the help. I and my son did not. When my parents passed, they left a fair amount to one of the remaining grandkids via their other daughter. They left a large portion of the remaining estate to me and my son. My father and I had talked often over his last few years. He knew he had given a subsoil amount more to the family of one daughter, A decent amount to the there, but very little to me.

He told me he wanted to leave most everything else to me. I was the beneficeary on his retirement accost and life insurance. However, once everything was done, the 4 who had received money all along felt they should be getting more. I am sure a few of them believe I cheated them. So whatever you decide, be sure to have setting in writing that explains your reasoning when you do pass.

 

[Midpack]

So all these nieces and nephews are in one family? Your BIL?

Can you discuss gifting ideas with him if they are all his children?

No, we have 9 nieces and nephews but we'd probably only gift the BIL's son and 2 daughters. I've explained in other threads, so won't elaborate here. All 9 would get inheritance, though also not equal.

 

[youbet]

Surely others here have grappled with warm hand vs cold hand. What made you choose to gift while alive or not?

We have one DS and three grand kids. We've been accelerating warm hand gifting based on some current work with our estate plan and those darn Illinois estate taxes.

Our oldest grandchild, 24, is special needs (cerebral palsy). Not much we can do for him today without upsetting his benefits. But our estate attorney is working on a special needs trust which we will fund as directed.

The middle grandchild, 23, is a recent MSEEE grad. We paid for all her qualified education expenses via ESA and 529 accounts. For the past three years we've been funding her Roth IRA annually from RMD distributions and will continue to do so. We also want to help with her 401k funding but need to do that indirectly. To max out her 401k she would need to withhold 27% of her pay but she can only afford to withhold 15%. We're offering to give her some cash for living expenses if she increases her 401k contribution to 27% to max it out.

Youngest grandchild, 19, is a sophomore in college and we're paying his qualified educational expenses from an existing ESA and, of course, as loyal grandparents send him a little token cash from time to time. He has a smallish UTMA account but I'm having trouble deciding how much more I would want to stick in that until I understand him a little better.

DS will be getting $19k X 2 annually (from RMD's).

You're dealing with nieces and nephews so I imagine you need to tread a bit more lightly in these matters than we do. Consulting with your BIL is in order.

Generally I wish we had started the "warm hand giving" earlier. We're very conservative financially and wanted to be sure we had belt + suspenders on our own needs (including LTC). If you're in that 100%+ stage, I'd suggest you get going on it.

 

[donheff]

I agree with your let them benefit now rather than later thinking. With our kids, we talked it over. My daughter elected not to take large gifts now because she would invest them. Then those amounts would be taken into account for the financial assistance package she gets for her daughter who attends the pricey private school where my daughter teaches.

 

[marko]

At least I get to see my money doing some good.

....or in our case, witness the folly of having done so.

 

[G POP]

Our plan is evolving but we have a general concept we use. "My (our) love is unconditional. My (our) wallet(s) on the other hand have conditions. You do good things, and you will be rewarded". Subjective and generic I know. Basically, we help when we feel we can and the need is there. 1K to DD, DS and their spouses at Christmas. $300 @ birthdays. Lesser amounts to nieces and nephews. Thankfully all are doing well in life. We also purchase airline tickets, dinner's, etc... 14 months ago, I had to help my DS in a pinch. The move from west coast to east coast exploded in an instant. With less than 24 hours' notice I flew to San Diego. 45 minutes later I was behind the wheel of my DDIL's car driving across country. My DS was in his car with my grand dog. 4 nights in a hotel and a few filled gas tanks later we made it. Last week I drove 5 hours one way to pick up my grand dog while the kid's vacation. I also buy tires and batteries for everyone's auto's. Also oil changes. Just making life a little simpler. As the estate grows so will the gifting. After age 70 for me, the kids will be intimately involved in our finances. I don't want to make mistakes with an aged brain.

 

[Sanstar]

We have always helped adult kids with lumpy, capital expense. Things like paying off student loans after they worked on them for a few years, down payments for first homes, newer and safer vehicles, couple rounds of IVF. As long as they continue to work hard and do their part, we’ll keep this up.

More recently, we started gifting $15K/kid on their birthdays and covering all expenses for family vacations. With DH starting RMD’s and our low key lifestyle we can do some now and leave a chunk to each at grave time. As our own travel slows and my RMDs start, we may double annual gifts.

Extended family members get equal amounts, based on occasion. For example, $100 per birthday and Xmas for those over 12 yrs and $1K per wedding and new babies. Under 12 yrs, gifts are books.

 

[Kings over Queens]

Surely others here have grappled with warm hand vs cold hand. What made you choose to gift while alive or not?

We have 3 adult kids, each with good habits, discipline and work ethics.

Of my parents and siblings, I am the most successful. Dad died broke and took some family members inheritances along the way.

My goal is to invest in my family, the kids in particular, but nieces and nephews too. One set is good, the other not so much. I'd like to be the example and influence that breaks the cycle of bad financial decisions and gets them on the track to financial independence. Lofty goal, sure, but what else am I gonna do...garden?

I don't view it as much as gifting, but rather, investing. As an example, if I can help my daughter with a low interest mortgage so she can keep her shares of QQQ in her brokerage account, growing, we both win. Things like that.

There is also the aspect that they could benefit from whatever inheritance they'd get now, rather than later.

 

[Route246]

We don’t have kids. Our estate will be left to one BIL and our nieces and nephews. Who knows what our estate will amount to when we’re gone in 20ish years, but today the amounts would be very substantial. The odds of us running out are remote.

The BIL has a greater NW than we do, so he doesn’t need the money - but he’s our successor trustee/executor. The nieces and nephews are financially all over the map, one who’s already amassed quite a bit in his mid 30’s, one without a penny to her name in her mid 50’s, all the others are doing OK but probably moving toward FI very slowly if at all.

I think we should gift the maximum tax free amount each year ($19K?) to some nieces and nephews now while they can really use the money, not just a large lump sum in 20ish years. [Please leave why “some” out of the this discussion] I don't care to know what they do with it. There won’t be any added tax consequences for us or them. There is no real danger we’ll come up short financially by gifting now. And we’d stop if our picture changes radically in the years ahead.

DW is adamantly opposed. She won’t say exactly why, but I think she’s afraid they’ll take it for granted and/or it will impede their financial discipline - and neither of us had any financial help from our parents as adults. And she’s convinced most of them talk to each other regularly, so if we don’t gift equally among them, it could cause friction - that’s not completely lost on me. And I think DW is subconsciously afraid we could run out ourselves in the many years ahead.

Odds are they’re all going to receive substantial lump sums when we pass, with our without gifting.

Surely others here have grappled with warm hand vs cold hand. What made you choose to gift while alive or not?

I think I know why your wife is adamantly opposed and I have similar sentiment, however, we started gifting to 2 nieces and 1 nephew with the wish from us that they set this aside for retirement security. It is a trial now to see how it is received. It is not enough to demotivate but it is significant enough to enhance their lifestyle if they so chose to do that. Since there are no strings attached we will observe and see how it goes, 100% aware of any smoke signals that emerge if things are not going as we wish. All 3 of them are seemingly responsible and all live below their means and are fully employed in secure jobs. I let my in-laws (their parents) know this is not a financial burden and it is a tax-related strategy, but not disclosing our wealth to them, at least not too much. To be perfectly honest it is really an insignificant amount of money to us but hopefully will be significant to them if they put it into retirement savings. I went through an elaborate briefing process to my in-laws (their parents) securing their blessing and they are also on high alert that these gifts will be hopefully used as intended and not for lifestyle enhancement.

There are two other adult children who are excluded from this and have no knowledge of what we are doing. We know from just observation that those two would not use the gifts as we would wish so we're not even bothering at this point. Equal shares will be specified in our will so they will get an equal share when our estate settles. They are not being cut off, just deferred and nobody knows about this.

Your wife has valid concerns. I am 100% behind her concerns. I had the same concerns. I segmented two groups of secondary heirs (aside from our primary heir children, as there will be plenty to go around and the bulk is going to charity, anyway). We made the call to gift to three heirs only after a lot of soul searching and speaking with their parents, trying to get a read on the character of their three children. We could be totally wrong about this and this could blow up in our face but we felt it is worth the risk.

Regarding estate split between inheritance and charity we are still working through this. None of our audlt children or nieces and nephews needs the money. Thankfully, they are all doing OK although one nephew is struggling it is self-inflicted and while he is always broke it is not something to feel bad about and we are not about to feed that rathole and make it worse. He just needs to grow up or learn to be impoverished for the rest of his adult life. He is more than capable of earning a living wage. I blame his problem on entitlement syndrome as he grew up privileged and protected and still believes to world owes him something. He is clearly waiting for his parents to die and hopefully at least one of them will have a long healthy life into their 90s.

 

[Gumby]

... Lofty goal, sure, but what else am I gonna do...garden?

Never underestimate the joy and fulfillment of gardening.

 

[livingalmostlarge]

I don't know and i'm reading all these responses with great interest. I started gifting into our kids UGMA accounts just because. I don't know what to do with our money. I think we definitely will need to gift our kids. But also I plan on gifting to my mom because her estate will also be going to the kids. I'm not sure who else and if we should.

Should we help my BIL, DH's cousin, and my aunts/uncles/cousins? Should we gift everyone the same amount? I can't help my cousins kids because some are already in college and that seems unfair. And everyone has different numbers of kids.

I've sort starting helping by paying for trips for the family. Any family we go with gets covered on both sides. I just sort of pay and don't ask for any reimbursement. But it's not said upfront and it's not overt.

I know i'm kicking the can down the road but i am not sure what we should do. we have more than enough to never spend it. and i'm not sure what charity i would want to leave cash too. I give cash now to the ones i like but i'm not sure about a bigger gift than $1k