Is Gifting an Early Inheritance a Good Idea?

Aging parents are faced with many financial decisions in their retirement years.  Some of the most difficult decisions revolve around estate planning and inheritance.  And many older adults likely wonder if they should hold on to all their savings or if family could benefit more by receiving an early inheritance.  “Giving While Living” is something to seriously consider if adult children or grandchildren would do better in the long run with a little help in the present.

But, before dipping into retirement savings, there are a number of questions to ask yourself about gifting money while you are living.

  1. Will the gift of money be equal among all children or grandchildren? Inequality can often lead to animosity between siblings.
  2. Does the idea of knowing how your hard-earned savings will help the next generation give you enjoyment?  Giving a portion of an inheritance early can offer a sense of satisfaction, knowing you helped to pave the way for family members to be successful.
  3. Could the gift impact retirement plans?  Will you still be able to live the life you saved for and take care of growing needs as you age? Living longer may require additional retirement savings.
  4. Are you over-giving?  Do adult children expect your financial help too often?  Try to ensure you own future financial needs are met first before considering financial gifts.
  5. Check the tax implications to be certain but in most cases, gifts of money to family usually won’t involve additional taxes.  In the United States, you can gift $14,000 each year to as many people as you wish, $28,000 for married couples, with a lifetime maximum of $5.43 million.
  6. Consider the gift of further education for grandchildren; by paying for college directly, the gifting tax can usually be avoided.
  7. Always discuss any large financial gifts with a professional to better understand the tax implications.

To learn more about Estate Planning visit the Financial Consumer Agency of Canada website by following this link.