The Benefits and Risks of Giving Children Their Inheritances While You Are Alive and Well

The Benefits and Risks of Giving Children Their Inheritances While You Are Alive and Well

According to a Merrill Lynch retirement study, 60 percent of people over the age of 50 would rather give inheritances sooner rather than later. Why? Many say they simply want to be there to enjoy helping their children pursue their dreams and realize their goals. If you are interested in giving inheritances to your children while you are alive rather than after you pass away, you must consider a number of issues.

For example, one of your children might need assistance now to pay off student loans or other debt, while his or her siblings may not. Or, perhaps one of your children is starting a business and would benefit greatly from your gift. The question is, if you give money to one child now, do you have a responsibility to give the same gift to your other children? The key to solving this thorny issue is to speak openly with all of your children, and make it clear that receiving a gift now could impact how much would be received after you pass away.

Another factor to consider, particularly with regard to large gifts, is whether your children are mature enough to handle the responsibilities involved. If you own a business and are considering turning it over to one of your children, can he or she manage it? Does he or she even want to run it? And how will your other children feel about it? Again, open communication is essential.

Of course, the most important factor to consider is whether you can comfortably afford to give money and other assets to your children before you pass away. The last thing you want is to discover five, ten or twenty years down the road you no longer have the money to support your lifestyle. And what if you or your spouse requires expensive long-term nursing home care in the future? The five-year look back period for gifting could jeopardize your eligibility for government assistance.

Before making the decision to give your children part of their inheritances now, contact us for a consultation. We can help you determine if you can afford to do so, and design a plan to maximize the benefits of your gift—for you and your children.