Many people have a desire to pass on wealth to the next generation. Whether it’s $100,000 or $100,000,000, it’s rewarding to see others thrive and be blessed by generosity. Legacy is commonly handled by simply listing beneficiaries in a Trust or Will without consideration to the next generation’s preparedness for wealth. A different and more powerful option is to begin the gifting process while living. Understandably, it can be difficult to know the best way to accomplish transfers of wealth.

Giving while living can provide opportunities to share a story: how wealth was built, maintained, and can be managed in the future. It provides a doorway to sharing beliefs and values around money. What was money like growing up that you want the next generation to know? It can bring great joy witnessing others enjoy wealth. In 2019, individuals can give up to $15,000 annually, or $30,000 for married couples, without incurring taxes.

Giving at death can provide tax advantages in many situations. Consider a simplified scenario in which a grandparent bequeaths stock at death. If the price of the stock was $80 on the date of death, $80 becomes the new, and possibly higher, cost basis for the inheritor. This creates a large opportunity for tax savings not attainable if stock was gifted to the next generation during life.

While knowing the best way to transfer wealth is not black and white, there are a few basic considerations when preparing inheritors. An initial step to giving while living is understanding your financial health and ensuring your financial house is in order. Before departing with wealth, make sure you have enough for your financial future. A qualified financial planner can assist you in understanding the impact of your giving. Consider giving small gifts over time for teachable moments. Rather than making gifts as a routine, such as birthdays or holidays up to a point they become expected, gift at tactical moments with increasing responsibility as maturity grows. Above all else, make sure to pass on wisdom before wealth by giving your time, not just assets.

A lack of planning can result in squandered wealth, divided families, and unintended tax consequences. Prepared beneficiaries are in a much better position to be good stewards of the wealth they inherit. You can access our guide to creating an impactful legacy here.

Talk with us about your portfolio or financial plan here: Talk with an advisor

More Reading: Stacking Charitable Giving to Maximize Tax Breaks

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