Are you considering an early inheritance for your children, grandchildren or other loved ones? It’s becoming a popular idea. A recent Merrill Lynch study of people age 50 and older found that 60 percent would prefer to give an early inheritance rather than wait until after death to distribute assets.1
The idea of an early inheritance may be appealing because it allows you to see how your legacy is used. You could pay for a grandchild’s college tuition or fund your child’s business idea. You may be able to help your children catch up on retirement savings or overcome financial difficulties. However, an early inheritance can also cause problems. You could give too much and create challenges for your own financial stability. Your gift could cause conflict within the family. There could be tax consequences. Below are a few issues and complications to think about as you plan your early inheritance strategy. A financial professional can also help you develop a plan that protects you, your legacy and your loved ones. Make sure you can afford it. You may feel like you can afford to give an early inheritance because you have plenty of assets. Often, when people retire, they have more money than they’ve ever had in their lives. It may seem like it would be impossible to spend your savings. However, there could be risks in retirement that you haven’t expected. For example, you may need long-term care. The U.S. Department of Health and Human Services projects that 70 percent of seniors will need long-term care, which can cost thousands of dollars per month.2 You also may spend more than you expect on health care. Fidelity estimates that the average retired couple will spend $280,000 on health care costs above and beyond what’s covered by Medicare.3 Before you give an early inheritance, make sure you have a plan in place for these costs. A long-term care insurance policy may be an effective tool. Have a conversation with your heirs about your plan. It’s likely that your family may welcome their early inheritance. They’ll probably appreciate the financial help. That’s not always the case, though. Some children may prefer a traditional inheritance. Others may not be responsible enough to handle a windfall. Some recipients may feel that others don’t deserve a gift. It’s important to have an open conversation with your family about your plans. Solicit their feedback and input without making promises. You may want to develop different plans for each of your children. You also may want to consider a trust, so the assets can be managed and distributed according to your wishes. Work with a professional and develop a strategy. You have the right to give your money to whomever you want, right? Not necessarily. If you give more than $15,000 to an individual in any given year, you may have to pay a gift tax. A married couple can give as much as $30,000 to each individual. Keep in mind: Gifts that are used to pay for medical bills or tuition aren’t included in the taxable amount.4 Before gifting your assets, it may be helpful to speak with a financial professional about structuring the gifts in a way that maximizes value for you and your recipients. A professional may also recommend tools that make the process more efficient for all involved. Ready to chart your early inheritance strategy? Let’s talk about it. Contact us today at Sprouse Financial Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. 1https://www.ml.com/articles/why-make-your-heirs-wait.html 2https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html 3https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs 4https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18274 - 2018/11/27
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