Many people prepare wills that determine how their wealth will be distributed among their heirs after they pass, but what is the best way to pass along assets to your kids while still living, and avoid possible penalties that might accompany such gifting? Here are some ways to transfer wealth to your family in the form of gifts.
Help With Education and Medical Expenses
You can gift money to grandchildren and other family members by contributing to a 529 college savings plan account, which can be used for qualified education expenses. Or you may also make direct tuition payments to an educational organization on behalf of your family member and it would not be treated as a taxable gift. Likewise, medical expenses are also not subject to the annual gifting limit when paid directly to the provider, and helping to cover these expenses can do a lot to ease someone’s financial burden.
Fund Retirement Accounts For Children
Give your children or grandchildren a head start on savings by making contributions to a retirement account for them, and you can start as soon as they have taxable earned income.
Fund an Irrevocable Gifting Trust
Instead of an outright gift, these accounts allow you to gift money to your kids in trust, with instructions to the trustee on how the gift may be used to the child’s benefit. This is a good option for a minor child, or for an adult child that cannot responsibly handle a large sum of money on their own.
Give Gifts Up to the Annual Gift Tax Exclusion Threshold
If you have enough resources to live comfortably, consider gifting the maximum amount to your heirs now, rather than waiting until you are gone. Gifting annually up to the maximum threshold can make a huge impact on the quality of life of your heirs, allowing them to pay off debt, start a business, or better plan for their futures.
Whatever gifting option you choose, always talk to your attorney first as there are always limitations to each option as well as possible tax implications you might need to be made aware of. The attorneys at Churchill, Quinn, Richtman & Hamilton have extensive experience protecting and preserving clients’ wealth for their current needs, as well as for their heirs. Contact us at 847-223-1500 to discuss your best options for protecting and distributing your wealth.