Estate Planner’s Perspective – Gifting today or bequests later?
Many clients plan for their passing by leaving their assets to their children at their death. They do not leave assets to grandchildren or great-grandchildren. Now that the exempt amount for estate taxation is $5Million per person, many have forgotten about gifting programs to diminish the size of their estates.
From a tax perspective, all of this makes sense; however, it may be worth another look since we have had big shifts in our economic reality.
For those with modest estates, staying the course as above is probably wisest. It is crucial to maintain adequate assets to last for your lifetime, including a period of disability.
For those with large estates, it may be time to look at the economic reality that is confronting your children and grandchildren. This generation of adults is confronted with paying for student loan debt, mortgage debt, funding their own retirements, and saving for their children to go to college all at the same time. Even with good jobs, they can be struggling economically. While they will certainly appreciate any bequest they may receive when you pass away, it may be a little late for it to make a meaningful change in their lives.
For your grandchildren, they will need education in this coming age. Yet, the increasing mountain of student debt is staggering. Higher education is now reaching the point where it is virtually unaffordable.
How can you alter your planning to assist with this changed reality?
First, you may consider gifting during your lifetime on an annual basis to your children or your grandchildren. Giving additional funds today may ease the financial burden they are laboring under. For grandchildren, you should strongly consider establishing and funding 529 Plans for college education. This money will grow as they do and may provide the ability for them to go to the college or university of their choice when they are ready, without being buried under a mountain of student loan debt.
Next, you may consider leaving bequests to your grandchildren directly in your trust or will. It will undoubtedly come at a time when they can truly benefit from the money. It can make a real change in their lives. Additionally, it will also touch their hearts to know that you remembered them.
New times may mean new plans.