There are many advantages of gifting to people or organizations while you are still living rather than doing all of your gifting through your will, reports Tri-County Times in the article “Giving while living.”
Chief among the reasons for gifting now is that your family may need the help now more that later. This is especially true if you have college-aged grandchildren.
Another advantage to gifting now is that you can enjoy seeing the benefit created by your gifting.
Third, you may see the gifts used wisely, or not, which could enlighten you about how to structure the delivery of future inheritance payments.
Gifting now to a charity allows you to see how the funds are applied, which can also give you valuable insight into the wisdom of making larger gifts later.
There are also tax advantages of gifting now. Among the reasons is that annual gift-giving can be used to reduce estate taxes. Today’s annual tax break for gifts to individuals is $15,000, which is separate from the lifetime exclusion of $11.4 million per person. Married couples can shield $22.8 million.
Remember that you can give more than $15,000 as a gift, but you have to know the limits. It’s easy to go over this without needing to pay taxes on the gift, but you may need to file a gift tax return. Speak with your estate planning attorney about the limits and when a gift tax return needs to be filed.
Funding 529 accounts is a wonderful way for gifting now to help the next generation achieve higher education; although, those funds can be used for other qualified educational expenses. There is a $15,000 annual gift limit, but you can bundle five year’s worth of $15,000 gift tax exemptions into an initial $75,000 contribution to one student’s 529 account.
Note that, if you die in the five years after making the gift, a prorated amount of your gift will be included in your estate for tax purposes, but the money remains in the 529 account.
Talk with your estate planning attorney about the advantages of gifting now, while you are still around to enjoy seeing its impact. While you’re doing that, make sure your estate plan is up-to-date, and that includes beneficiary designations for life insurance policies, retirement accounts, and transfer on death accounts. Check on how assets are titled and if trusts have been funded. Then, go plan a memorable family vacation.
Reference: Tri-County Times (April 25, 2019) “Giving while living”