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Bronx & New Rochelle Real Estate Attorney
Providing a compassionate & attentive efficient legal service in estate planning & real estate.
Providing a compassionate & attentive efficient legal service in estate planning & real estate. Providing a compassionate & attentive efficient legal service in estate planning & real estate. Providing a compassionate & attentive efficient legal service in estate planning & real estate. Providing a compassionate & attentive efficient legal service in estate planning & real estate. Providing a compassionate & attentive efficient legal service in estate planning & real estate.

Pros and Cons of Passing Out Inheritance Money Early

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You have worked hard all your life accumulating funds for your retirement, and now have a tidy nest egg to pass along to your children. In some cases, rather than waiting until you pass away to distribute money to beneficiaries through your will, some people opt instead to make financial gifts to children, grandchildren, and other beneficiaries now. The following highlights how this can fit in with your overall estate planning, and the pros and cons you need to consider.

Benefits of Giving Away Inheritance Money Now

While giving your children or grandchildren large amounts of money now out of their future inheritance can trigger taxes, under Internal Revenue Service 2018 guidelines, you can gift up to $15,000 per person, penalty-free. This can be enough to help those you love with money to buy a home, pay off debts, take a luxury vacation together as a family, or provide for other costs and expenses. Some of the advantages to making these smaller gifts now, rather than passing along a larger sum once you pass away, include:

  • Getting to experience the joy of giving and seeing the impact it has on your loved ones’ lives;
  • Having the satisfaction of knowing you are providing practical help when your children are younger, and likely need it the most;
  • Being able to provide trips or experiences you would otherwise not be able to enjoy together;
  • Allows them to make important investments and contributions into their own retirement accounts.

The IRS also allows you to make educational contributions and to provide for medical expenses tax free, which is something else to keep in mind when considering contributions. Paying out these amounts now and thereby reducing your overall assets can also play a role in Medicaid planning, saving you out of pocket costs for any long term care you may eventually need.

The Downside of Making Early Inheritance Gifts

In New York, unless your estate adds up to more than $5 million estate taxes are likely not to be an issue compelling you to give away inheritance money early. One of the key disadvantages to making yearly distributions is the potential risk for running yourself short.

According to SmartAsset, you are likely to need at least $500,000 or more to provide for a modest living during your retirement. Once money is given away, even if to close family members, the odds of getting it back are low. Other disadvantages that could arise include:

  • Early distributions could cause some family members to feel shortchanged;
  • Giving away small chunks over time eliminates a windfall for your heirs in later years;
  • Family members with poor spending habits or addicts may end up squandering the money they receive.

Contact Us Today for Help

At Cavallo & Cavallo, our New York estate planning attorneys can meet with you to discuss whether making advance gifts to loved ones is the best option in your situation. Call or contact our office online and request a consultation in our Bronx or New Rochelle office today.

Resources:

irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes

smartasset.com/retirement/average-retirement-income