If you’ve been hearing rumors of a grandparent who passed away and left you with a wealth of money, take heart! It is possible to gift away an inheritance before death in many ways, including through insurance and life insurance inheritances. This article breaks down how these are both legal, tax-free options for gifting an inheritance early, minimizing your exposure to estate taxes.
Why gift away an inheritance before your death?
There are a few reasons why gifting an inheritance before your death can be a good idea. First, it can allow you to reduce the size of your estate and avoid probate proceedings. Additionally, gifting away an inheritance prior to your death can provide more immediate and meaningful financial support to beneficiaries than if the gift is made after your death. Finally, preventing the sale of inherited assets can protect them from unscrupulous buyers and preserve the integrity of your estate plan.
The beneficiary of a gift doesn’t have to pay inheritance tax on gifts if the asset is given to a kid, a friend, or just about anyone else. Giving assets to a beneficiary through a gift in trust avoids taxes on gifts that are made in excess of the yearly gift tax exclusion.
To help guide you through the process of gifting an inheritance, here are four tips for maximizing the benefits of this arrangement:
1. Make a list of who you want to benefit from your inheritance. Beneficiaries will generally have a more clear path to receiving funds if they are named in advance.
2. Decide how much money you want to give away. Once you have determined who will receive the gift, determine the amount of money you wish to give them. This is typically done by multiplying the beneficiary’s expected income or assets by a predetermined number (usually 10 or 20).
Gifting and trusts–everyone can benefit
If you are planning to give away an inheritance before you die, there are some things you should know. Here’s how to gift away an inheritance before your death:
1. Talk to your lawyer. It’s important that you work with a lawyer who is familiar with trusts and estate planning, in order to make sure everything goes smoothly. A lawyer can help create a trust, evaluate your options for gifting the inheritance, and create a will or other estate plan in case you die before your children reach adulthood.
2. Choose the right time to give the inheritance. The timing of the gift is important because it can affect how much money your heirs receive. If you want to leave your children everything, you should give your inheritance immediately after you die. However, if you want them to have less money than they would if you died without a will, you may want to wait until they reach an age when they can manage their own finances better.
3. Make sure the gift is tax-deductible. You may be able to reduce the taxes payable on your inheritance by giving it in a way that is tax-deductible. Various types of gifts – including cash, shares or property
How do I create a trust or gift my inheritance away?
You can create a trust or gift your inheritance away before your death by following these steps:
1. Contact an estate planning attorney who can guide you through the process.
2. Draft a will or legal document designating the remainder of your estate to the trust or gift recipient.
3. Document the trust or gift in advance of your death.
4. Execute the document and notify the beneficiaries of the trust or gift.
What if I need it after my death?
If you’re facing the inevitability of death and would like to leave an inheritance to someone before you go, there are a few things you need to keep in mind.
First and foremost, make sure your will is up to date. If you don’t have a will, or if it’s not up to date, your estate can go to probate which could take months or even years. Probate is expensive, so make sure your beneficiaries are named in your will if you want them to receive any estate assets. Secondly, determine how much money you want to leave each person. This isn’t as difficult as it sounds: simply divide your estate equally among all of your beneficiaries. If they’re minor children, be sure to update their respective guardianship documents with your new inheritance information as well. Finally, don’t forget to update any beneficiary addresses or contact information if there has been a change since you made your will. If all goes according to plan, beneficiaries should receive their inheritance within six months after you die.
Conclusion
If you are the executor of an estate, or if you are handing down your business to a trusted colleague, now is a great time to start thinking about how to gift away your inheritance. Here are three tips for navigating this delicate and exciting process: first, make sure you have a clear understanding of what will be included in the estate; second, consult with an attorney to get specific guidance on gift tax laws; and third, create a donor registry at GiveLifeNews.org so that loved ones know exactly who they should contact if they want to make a charitable donation in your name.
