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3 Tips to Consider Before You Give an Early Inheritance to Your Family

Thinking about giving your children or grandchildren an early inheritance? You’re not alone. 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


There are definitely advantages to giving an inheritance while you’re still alive. You get the benefit of seeing your kids or grandchildren put the assets to good use. Your gift could help them pay for college, prepare for retirement or even start their own business.

However, an early inheritance can also backfire. If you don’t plan properly, you could put yourself in financial danger. Your gifts could also cause conflict and resentment within the family, especially if some recipients feel others have received special treatment. There are also potential tax issues to consider.


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.


Don’t give more than you can afford.


Often when people retire, they have more assets than they’ve ever had in their life. It’s natural to feel like you have more money than you could possibly spend. You might feel that you’re safe giving assets to loved ones.


However, you could face costs in retirement that you haven’t planned for. That’s especially true in the later years of retirement. Fidelity estimates that the average retired couple will spend $280,000 on health care costs above and beyond what’s covered by Medicare.2 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.3


Before you start gifting assets to children, make sure you have a plan in place to cover any unplanned costs that arise in retirement. Remember that your children and grandchildren have the luxury of working to generate income. That may not be an option for you. Be sure to put your needs first.


Have a discussion with your family.


Many people embark on a gifting strategy under the assumption that their gifts will be welcomed with open arms. As is often the case with families, however, things aren’t always as simple as they appear.


It’s possible that some children may prefer a traditional inheritance. Others may not be responsible enough to handle a sizable gift. If you’ve provided financial help to certain kids in the past, others may feel it’s unfair to provide additional gifts.


Talk with your kids and grandkids, both collectively and individually. Don’t make promises or guarantees* about what you’re going to give. Rather, solicit their feedback and input. It’s possible that your gifting plan may differ for each individual based on his or her needs. You can avoid a significant amount of drama and conflict by engaging in conversation.


Consult with a professional first.


You may think that gifting assets to your children is as simple as writing a check. After all, it’s your money. You can give it to whomever you like, right?


Not quite. The IRS taxes gifts that surpass a certain threshold. Each year, you can give up to $15,000 to an individual without facing a gift tax. A married couple can give as much as $30,000 to each individual. Keep in mind that gifts 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 to help you structure 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 Upstate Wealth Management. 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://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

3https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

4https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes


*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.


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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Tel: 864-655-4700

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*Securities and Advisory Services Offered Through Client One Securities, LLC Member FINRA/SIPC and an Investment Advisor. Upstate Wealth Management and Client One Securities, LLC are not affiliated.

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. 

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