Should I Give Gifts During My Life or Leave Them in My Will?
Giving gifts to family members during your lifetime can be an effective estate planning tool for reducing the value of your taxable estate. However, there could be other options for reducing gift and estate taxes. Therefore, before giving away your assets during your lifetime, it is wise to seek legal advice from an experienced Maryland estate planning attorney.
Can I Afford to Give Gifts During My Lifetime?
Many people consider giving gifts during their lifetime for tax purposes. They want to reduce the gift tax and estate tax their heirs must pay. Therefore, they may give gifts to a charitable organization or transfer assets to a living trust.
However, can you afford to give gifts during your lifetime? You need to answer this question before you begin your estate plan.
If you have a modest estate and you intend to use your assets to support yourself after retirement, giving real estate and other assets away during your lifetime may not be a good idea for you. You need to carefully consider what could happen if you outlive your retirement funds.
On the other hand, if you have significant assets you intend to pass to your heirs, giving away some of these assets before your death could have several benefits.
Benefits of Giving Gifts During Your Lifetime
One of the best benefits of giving gifts during your lifetime is that you can help a loved one or friend who may need assistance right now. For example, you could pay a grandchild’s tuition payment, help your niece with a down payment on a home, or pay a high medical deductible for a loved one. The emotional reward of helping someone is often the best benefit of gifting.
However, gifting also reduces your taxable estate. By taking advantage of the yearly gift tax exemption, you reduce the taxable value of your estate.
Also, you bypass probate by gifting. Probate records are public. Gifting is private. Therefore, avoiding probate means that your gift can be kept between you and the recipient.
Gifting Without a Plan Can Cause Problems
It may sound simple. Give your assets to your loved ones during your lifetime to avoid probate and taxes. However, it may not be that simple. When gifting assets during your lifetime, there are several matters to consider. Gifting assets without a plan could cause more taxes for family members.
Instead, gifting needs to be combined with a comprehensive estate plan. Each gift is planned with a specific goal. Your gifts are timed to ensure that taxes are minimized or eliminated while maximizing the benefit to the recipient. By planning your gifting, you ensure your financial needs are met while helping your loved ones now and leaving them a legacy after your death.
Contact Our Maryland Estate Planning Attorney for More Information
Estate planning need not be stressful or time-consuming. Our Maryland estate planning attorney walks you through each step of the process to develop an estate plan that meets your needs and accomplishes your goals. Call today to schedule an appointment.
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