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estate planning and elder law

When Should Children Receive an Inheritance?

Have You had the Estate Planning Talk with Your Adult Children?
Is it better to help your children when you’re still alive? Or wait until after you die?

When should children receive an inheritance?  Should your assets only go to your children only after you have passed, or should you use some of the money to help your kids out while you are still living? That’s a question that many families grapple with, and the attorneys at Beck, Lenox & Stolzer Estate Planning and Elder Law, LLC, LLC, often address this question in client consultations.

Not every family can afford to give their children an advance on their inheritance, but for those who can, here are some things to consider according to a recent article “When to Give Inheritance Money to Your Kids,” from The Wall Street Journal:

Some financial advisors believe that “gifting with warm hands” is a better way to go. Parents can enjoy seeing their children and grandchildren benefit from having the help, based on when it is needed. Decoupling an inheritance from parental death is a happier scenario than the alternative.

Others believe that current financial needs, taxes and the tax situations of the parents and children ought to be the deciding factor. First, is there enough money for the parents to live comfortably in retirement? That includes being prepared for the cost of an unexpected health crisis that might lead them to need short- and long-term care. Follow that by understanding the tax situation of both parents and heirs. Once those answers are fully formed, then a discussion about gifting can move forward.

Another school of thought is to stop saving every penny and enjoy life to its fullest right here, right now. Some people are more concerned with maxing out their 401(k) plans than enjoying their lives. A healthy balance between protecting assets for later years, creating wealth for the next generation and having some fun too is the goal for many families.

When should children receive an inheritance?  This Wall Street Journal article suggests that if you have any concerns about how your children will handle an inheritance, make a gift while you are living. You’ll get to see how they handle it, responsibly or recklessly. This may inform your planning for the future, including the use of spendthrift trusts.

The pandemic has forced many people to confront their own mortality and consider how they really want to spend the rest of their lives, as well as their assets. Many parents are preparing to make changes in their estate and gifting plans to accommodate needs that have arisen as a result of COVID’s economic impact.

Talk with your children about finances—yours and theirs. Discuss their needs, especially if they have been unemployed for an extended period of time. If they need money for something critical, like paying for health insurance or catching up on student loans, the gift should be made with a clear understanding of its intended purpose.

Your estate planning attorney can help create a plan that works while you are living and after you have passed. Trusts may be a strategic plan for sharing assets while you are alive, with some tax advantages. Beck, Lenox & Stolzer creates Heritage trusts for many clients.  This type of trust can protect a child or grandchild from losing all or a portion of their inheritance to creditors, bankruptcy courts and even divorce court.

Reference: The Wall Street Journal (April 30, 2021) “When to Give Inheritance Money to Your Kids”


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