Incorporating a program of lifetime gifts into your estate plan can offer significant advantages for you and your beneficiaries. Lifetime gifts, which are financial gifts or transfers of property made during an individual’s lifetime as opposed to bequests made through a will or trust upon death, are a proactive approach to wealth transfer. They not only facilitate the efficient distribution of your assets but also allow your loved ones to receive support when they need it most. By thoughtfully planning and executing these gifts, you can transfer assets to your beneficiaries directly and immediately, allowing them to benefit sooner rather than later. This method helps optimize tax benefits, maintain greater control over your estate, and provides the joy of seeing your contributions make a tangible difference in the lives of your loved ones, all while potentially minimizing estate size and associated taxes.
5 Key Lifetime Gift Benefits to Consider
- Reduced Probate Costs and Taxes: Lifetime gifts, particularly those involving income-producing assets, can significantly reduce the size of your estate. A smaller estate can lower probate costs and potentially diminish or eliminate income and estate taxes. By gifting assets while you are alive, you may also take advantage of annual gift tax exclusions and lifetime gift tax exemptions, further minimizing tax liabilities.
- Increased Certainty and Control: Lifetime gifts ensure that your assets are distributed according to your wishes, such as to your children or grandchildren, rather than being vulnerable to claims by a former spouse or creditors. Unlike a will, which can be disputed, lifetime gifts provide a more secure method of transferring assets. For example, if you gift a property to your child during your lifetime, it becomes their property immediately, and they can use it as they see fit. This can be particularly beneficial in complex family situations or where disputes among heirs are possible.
- Enhanced Privacy: Gifting assets during your lifetime maintains privacy. Only you, the recipients, and possibly tax authorities must be aware of the details. In contrast, assets distributed through probate become part of the public record. This privacy can be beneficial in protecting your family’s financial matters from public scrutiny and potential external pressures.
- Immediate Joy and Support: Lifetime gifts allow you to experience the profound joy and benefits your loved ones derive from your generosity. This can be especially significant if your heirs can use the assets when they need them most, such as for education, buying a home, or starting a business. Additionally, it offers an opportunity to directly share your values and intentions, fostering a deeper connection with your beneficiaries.
- Strategic Financial Planning: Incorporating lifetime gifts into your estate plan can be a strategic move to manage your financial legacy. By gradually transferring wealth, you can lower your taxable estate, use gifting strategies that align with your financial goals, and ensure a smoother transition of assets. However, it’s important to note that lifetime gifts may have implications for your own financial security and lifestyle, and they may not be suitable for everyone. Working with a wealth management professional can help you identify the most tax-efficient methods and timing for your gifts.
In summary, a well-structured program of lifetime gifts can be a prudent element of your estate plan, providing benefits not only to you and your estate but also to your heirs. However, the process of incorporating lifetime gifts into your estate plan can be complex and requires careful consideration of your unique circumstances. Consulting a qualified estate planning professional is essential for personalized advice and to understand how lifetime gifts can fit into your unique circumstances. They can help you navigate the complexities of tax laws, optimize your gifting strategy, and ensure that your estate plan aligns with your long-term financial goals and personal wishes.
If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or connect@lptrust.com.
This newsletter is provided for informational purposes only.
It is not intended as legal, accounting, or financial planning advice.
