Gifting vs Inheritance

[Slim11]

You have a ton to go on here allready. Make sure the wife is on board, even if it means a little less money. But gifting is a great idea. And will make a diffrence in some of those people's lives. Make it even for them all though. Getting left out is never a good feeling, and can cause infighting.

 

[RetiredHappy]

Not to hijack the thread, but I have been thinking of sending money to my brother and sister-in-law (overseas) who are not as well to do as my sister (8 figure net worth) and myself. I know that they are struggling a little but not starving and they own their own home outright. Their daughter just got married and traditionally in our culture, children always contribute money (monthly) to their parents when they start working. I assume that's what she does. She has a good job since graduating from university and her husband is in a similar situation. I don't know how to broach the subject with my brother.

 

[brett]

We are gifting. No gift tax of any sort in our jurisdiction.

We have more than enough. We have a high six figure/low seven figure inheritance coming once probate/estate is closed (18 month). We plan on passing it down a generation. Dividing it between our two children. They can use the money....we do not need it.

We intend to do more as time moves forward. No use hoarding monies that we will never use. We have already targeted enough funds to pay for the post secondary edu of four grandchildren (or more should our son/wife decide to have children.

We worked hard for our money and invested wisely. We want to use for the benefit of others while it can enhance their lives.

 

[pjigar]

Could you please elaborate? What are the tax reasons for gifting?

1. The federal estate and gift tax: The gifts under $19K does not count towards the estate exemption limit. This eventual estate tax is subject to a generous exemption limit of about $14M per person TODAY. BUT estate exemption amount historically has been as low as 2M so I would rather be cautious and transfer as much estate to the eventual recipients tax free sooner rather than later.

Historical Look at Estate and Gift Tax Rates

Wolters Kluwer takes a historical look at estate and gift tax rates in the United States.

www.wolterskluwer.com

One more point, and I didn't consider this one until someone on this forum pointed out: The money transferred out of the estate has a much larger time-value today vs decades later.

2. Tax rate arbitrage: You can gift appreciated stocks as a gift and recipient can sell with a lower capital gains tax rate (potentially 0%)

3. Gifts invested in Roth: We do this with DD. We give a "matching gift" if she contributes to Roth. This "gift" will grow tax free forever. She can have her cash and spend it too! Most young singles and young couples don't have a lot of cash left over to take advantage of the Roth contributions early in their life.

So far we are doing #1 and #2 because DD has limited income to be claimed as a dependent. We plan to leverage all 3 once DD has a full time job; to get the best tax-bang for our bucks.

 

[badatmath]

I think it is naive to assume the "gifted to" won't tell the "non-gifted to" what they got and to assume it won't cause bad feelings.

Even if you and DW do not mind having feelings directed towards you, do you really want them to be mad/jealous/etc with each other? Entirely up to you of course.

 

[marko]

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

Gifting isn't one of life's requirements. Care must be taken when expanding out beyond your immediate circle as aunts, uncles and cousins (why not neighbors and acquaintances too?) could find it offensive and presumptuous. "Thanks, but what makes you think we need money".

After all the gifting, will you have enough for LTC? Few things stay steady-state.

Speaking of LTC, I'd be careful of gifting mom. If she needs LTC that gift could end up going to the NH instead of passing to the kids.

 

[audreyh1]

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

Other than charitable donations we pretty much limit gifting to immediate family. We have some nephews, but we gift to their dad. We have no children. We gifted to parents when they were alive.

If needed we would have helped DF with long term care expenses, but his income and savings covered it. He still left a substantial estate.

Funding group vacations and outings is a great idea too.

 

[Mark1]

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.

Why not just give BIL $36,000 to give to his 3 kids ($12,000/each).

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.

Makes me wonder if BIL is gifting $19,000 to each every year(?). Also, I'm confused by one doing well, one without penny and others OK. That's at least four, not 3 total(?).

Maybe your wife is right. Best to just stay out of it.

 

[Stormy Kromer]

I think it is naive to assume the "gifted to" won't tell the "non-gifted to" what they got and to assume it won't cause bad feelings.

Even if you and DW do not mind having feelings directed towards you, do you really want them to be mad/jealous/etc with each other? Entirely up to you of course.

Yup. Train wreck waiting to happen.

 

[Midpack]

I think it is naive to assume the "gifted to" won't tell the "non-gifted to" what they got and to assume it won't cause bad feelings.

Even if you and DW do not mind having feelings directed towards you, do you really want them to be mad/jealous/etc with each other? Entirely up to you of course.

I think that’s what DW is most concerned about, and I can understand. Could be a “no good deed goes unpunished” situation. Despite most living in different states (VT, SC, TX, NH, AZ, RI), they may talk to each other more than I realize…

 

[Koolau]

I think it is naive to assume the "gifted to" won't tell the "non-gifted to" what they got and to assume it won't cause bad feelings.

Even if you and DW do not mind having feelings directed towards you, do you really want them to be mad/jealous/etc with each other? Entirely up to you of course.

I suppose one could stress to the recipient that any negative feedback from anyone else in the family (because the information "go out") would totally nix any further such gifting on your part. That wouldn't guarantee anything. I'm just thinking that self-interest - if nothing else - might go a long way in keeping it quiet.

 

[pjigar]

I think that’s what DW is most concerned about, and I can understand. Could be a “no good deed goes unpunished” situation. Despite most living in different states (VT, SC, TX, NH, AZ, RI), they may talk to each other more than I realize…

Or you can create an artificial barrier to entry: e.g. "We would gift 1:1 match of (Roth or Traditional) IRA contributions to anyone who participate." Open invitation to all but you know who will take the "bait".

 

[cathy63]

I think that’s what DW is most concerned about, and I can understand. Could be a “no good deed goes unpunished” situation. Despite most living in different states (VT, SC, TX, NH, AZ, RI), they may talk to each other more than I realize…

If they're connected on social media, then it doesn't matter where they live or how much they talk. I have cousins I haven't seen in decades, but I know something about what's going on in their lives because of Facebook. It only takes one person posting that they were able to do X thanks to Aunt and Uncle Midpack's generosity and all of them will know about it.

 

[livingalmostlarge]

Gifting isn't one of life's requirements. Care must be taken when expanding out beyond your immediate circle as aunts, uncles and cousins (why not neighbors and acquaintances too?) could find it offensive and presumptuous. "Thanks, but what makes you think we need money".

After all the gifting, will you have enough for LTC? Few things stay steady-state.

Speaking of LTC, I'd be careful of gifting mom. If she needs LTC that gift could end up going to the NH instead of passing to the kids.

I think my family is much better than where we started. Not enough to not want any help or accept it happily. I'm also close with them so there is that. The real issue is the imbalance between DH and my family size and his side is more successful than mine. But I'd like to give to his side equally even though they don't need it.

My mom won't extra for LTC but if she did i'd pay for it. And we're fine with LTC as well. I wouldn't normally do this but we have an overabundance and I never considered any of this before. Before i was concerned about the kids and ourselves. Now it's a little different.

 

[splitwdw]

I have no children. My husband and I started gifting a small amount to our 8 nieces and nephews, who are our beneficiaries, the year before he died. I've continued gifting equal to all of them, same as my will, even though I don't agree with how they handle their finances, political leanings, immature attitude. I'm not going to try to change them. We went into this with eyes wide open. This is a gift.
Not sure why OP thinks he has to consult with his BIL regarding gifting to kids. It's your money not his. I did not consult with my executor who is the mother of one of the beneficiaries.
I do agree that you and your wife should be in agreement regarding gifting. You don't have to start out with the full gift amount. We started with 1000. twice a year for each kid and I've increased it each year by 500. I don't ask what they do with the money gift or any gift for that matter. It's a gift, no strings attached.

 

[shortstop14]

We've begun gifting with higher amounts to our only child. My wife wants to move significant portions of her inheritance on to our daughter and grandchildren. It's a significant amount, essentially doubling our (well, my wife's) assets. She wants to help them to avoid some of the financial struggles we had in our younger days. That will also allow the survivor of the two of us to mitigate state estate tax, hopefully sometime down the road.

We don't need the money, as long as we have enough for our needs and long term care - but I do have some desire to structure things so that it's truly generational financial security, at least for the next two generations.

 

[Stormy Kromer]

We've begun gifting with higher amounts to our only child. My wife wants to move significant portions of her inheritance on to our daughter and grandchildren. It's a significant amount, essentially doubling our (well, my wife's) assets. She wants to help them to avoid some of the financial struggles we had in our younger days. That will also allow the survivor of the two of us to mitigate state estate tax, hopefully sometime down the road.

We don't need the money, as long as we have enough for our needs and long term care - but I do have some desire to structure things so that it's truly generational financial security, at least for the next two generations.

I agree with your comments 100% But I have to ask.....who is that shortstop turning the double play in your avatar? He is good.

 

[shortstop14]

I agree with your comments 100% But I have to ask.....who is that shortstop turning the double play in your avatar? He is good.

Little O - Omar Visquel. One of the best defensively. Unfortunately, I can't get that kind of elevation in my double play turns any more. Or any elevation, for that matter.

 

[brett]

Our gifting started with a suggestion by our CPA that we consider giving more. We did. But in the process we reviewed our giving. The goal was to make the dollars count.

Some of the things we looked at was charity overheards/admin, money spent on third party direct marketing firms, money spent out of country, money spent on the actual cause. We wanted our dollars to go where we knew it would really make a difference.

We settled primarily on our local food bank. Low overheads, one dollar turns into 1.80 or more in food purchases. DW reduced her faith donations, I reduced a number of my former charitable causes becasue of admin/overheads in the 50 plus range. Plus outrageous exec. compensation.

Bottom line...we increased our giving 3X but we believe we are getting much more for our dollar than before.

When we give to children, relatives, others it is always on the basis that it is private. No one but us knows. If that is every violated, we will stop giving.

 

[Gumby]

....

Some of the things we looked at was charity overheards/admin, money spent on third party direct marketing firms, money spent out of country, money spent on the actual cause. We wanted our dollars to go where we knew it would really make a difference.

We settled primarily on our local food bank. ....

brett: Thank you so much for this. I work in my church food pantry, and I can tell you that giving does not get more direct and personal than this. Some people give us actual cans and boxes of food. We put them on the shelf and hand them out to our clients. Some people donate money, which we use to buy food. We keep track of all the sales and prices at the various groceries in town and buy things wherever we can get them the cheapest. Every single person working in the food pantry ministry is a volunteer.

The need is acute. Most of our clients are older than me and they are barely feeding themselves, even with our help. Some are younger, but for a variety of reasons are sleeping out behind the library. Some are young mothers with a couple of children. They have a job, but it's not enough, and they come to us on their lunch hour. And the need is growing. I fear that we will have a huge rush of new clients after SNAP shuts down on Saturday.

To the best of our ability, we feed them. We don't ask why they need food. We don't require that they have any connection with our church. We ask only IF they need food. Because Christ told us to feed the hungry, just as if they were him. (Matthew 25:40 - "whatever you did for one of the least of these brothers and sisters of mine, you did for me.")

 

[badatmath]

brett: Thank you so much for this. I work in my church food pantry, and I can tell you that giving does not get more direct and personal than this. Some people give us actual cans and boxes of food. We put them on the shelf and hand them out to out clients. Some people donate money, which we use to buy food. We keep track of all the sales and prices at the various groceries in town and buy things wherever we can get them the cheapest. Every single person working in the food pantry ministry is a volunteer.

The need is acute. Most of our clients are older than me and they are barely feeding themselves, even with our help. Some are younger, but for a variety of reasons are sleeping out behind the library. Some are young mothers with a couple of children. They have a job, but it's not enough, and they come to us on their lunch hour. And the need is growing. I fear that we will have a huge rush of new clients after SNAP shuts down on Saturday.

To the best of our ability, we feed them. We don't ask why they need food. We don't require that they have any connection with our church. We ask only IF they need food. Because Christ told us to feed the hungry, just as if they were him. (Matthew 25:40 - "whatever you did for one of the least of these brothers and sisters of mine, you did for me.")

I believe you but I don't (about the need). Like I have met people who go to food banks and say they are a family of 5 when they are actually only 1 person just to get more free stuff. Which they joke about not using due to it not being their preferred brand/type/etc. The cars I see at the food bank near me are newer and nicer than mine. I could go on but you get the idea. I have really mixed feelings about all charities the older I get. IDK the answer of course. Research your charity I guess. My will has my money split between more charities than I should otherwise use due to hoping at least one will be "right" and use the money well. Yes sure I checked them on charity navigator but ?

 

[Gumby]

I believe you but I don't (about the need). Like I have met people who go to food banks and say they are a family of 5 when they are actually only 1 person just to get more free stuff. Which they joke about not using due to it not being their preferred brand/type/etc. The cars I see at the food bank near me are newer and nicer than mine. I could go on but you get the idea. I have really mixed feelings about all charities the older I get. IDK the answer of course. Research your charity I guess.

I help carry their bags to their car. I see what they're driving and I see the child's car seat in the back seat. I see the guy who lives in the Ford Econoline van with the full sized sofa from the dump in the back. I know the guys who actually do live in the woods and could not take canned foods because they had no can opener (a problem I fixed), and the girl who comes on a bicycle and can only take what she can carry in her backpack. I have driven some of them to the SRO place they are sleeping in today. I actually talk to these people and know their stories. And I am by professional training and basic nature a cynical son of a bitch. There may be some scammers, but the vast majority of them are legitimately hungry.

 

[Koolau]

I help carry their bags to their car. I see what they're driving and I see the child's car seat in the back seat. I see the guy who lives in the Ford Econoline van with the full sized sofa from the dump in the back. I know the guys who actually do live in the woods and could not take canned foods because they had no can opener (a problem I fixed), and the girl who comes on a bicycle and can only take what she can carry in her backpack. I have driven some of them to the SRO place they are sleeping in today. I actually talk to these people and know their stories. And I am by professional training and basic nature a cynical son of a bitch. There may be some scammers, but the vast majority of them are legitimately hungry.

Clearly you are being blessed by being a blessing to others. Thanks for the great stories of your experiences at the food bank.

You're storing up treasure that will last forever.

 

[misanman]

For the first time, we are seriously considering gifts to our children (3) and grandchildren (10). The ages of the grandchildren range from 9 to 25 so parents would have to help the younger ones save/invest their money appropriately. We would do this all at the same time - maybe at Christmas but still not sure about that. We haven't exactly figured out where the funds would come from - traditional investment account, IRA, or Roth or a combination.

 

[audreyh1]

Not sure why OP thinks he has to consult with his BIL regarding gifting to kids. It's your money not his. I did not consult with my executor who is the mother of one of the beneficiaries.
I do agree that you and your wife should be in agreement regarding gifting. You don't have to start out with the full gift amount. We started with 1000. twice a year for each kid and I've increased it each year by 500. I don't ask what they do with the money gift or any gift for that matter. It's a gift, no strings attached.

It makes sense to discuss with BIL for BIL’s kids.