Tuesday, May 20, 2014
Many people in their golden years want to leave gifts for their heirs, however, they are unsure whether to gift now or wait until they pass away. Below are the pros and cons of gifting now as opposed to later:
- Giving Heirs the Money Now
- Seeing them enjoy it. Giving your heirs gifts now gives you the opportunity to see the difference it makes in their lives.
- Give advise. If you would like to see your gift used for a specific purpose, giving the money while you are alive gives you a chance to let your heirs know your wishes.
- You can pay for something. Rather than gifting money outright, you can pay for something. This ensures that the money is spent on something you want it to be spent on.
- Cease giving money. If your heirs spend the money unwisely, you have the ability to stop the cash flow.
- Avoid taxes. For 2014, the IRS allows you to exclude up to $14,000 in gifts per heir. If you gift beyond that amount, you will need to claim the “unified credit” in order to avoid paying taxes on the gift.
- Waiting Until You Pass Away
- Need money later. If you discover you need the money to pay for your own expenses (i.e. medical bills).
- Change your mind. You can always adjust your will to change the amount you will be leaving heirs after you pass away, but you cannot take back money you have already gifted. Waiting until you pass away gives you the chance to change your mind during your lifetime.
- Appreciation. By waiting until you have passed, you give your heirs a chance to “make their own way in the world at a younger age.” Your heirs will be older and more responsible when they receive the inheritance, which may cause them to appreciate the gift more.
See Paula Pant, Should You Make Gifts to Your Heirs Now, or Should You Wait? The Motley Fool, May 18, 2014.