Timing, so they say, is everything. And now might be the ideal time to divide an early bequest. If you’ve amassed a sizable amount of wealth throughout your career, you’ve probably given some thought to how to leave it to your children following your passing. But have you considered distributing part of it to them beforehand?
Planning for your financial legacy is a crucial part of estate planning. You can weigh the advantages and disadvantages of giving early inheritance advice to your family and yourself by considering the following:
Assistance When Required
Young adult children must overcome several obstacles, such as paying back student loans, purchasing a home, or opening a business. A thoughtful present from you at the right time can have a profound impact on your children’s life.
You can set up a suitable trust fund and supervise its management if you’re concerned about stingy kids or kids with special needs so that your instructions are appropriately carried out. Consider strategies to pass along your financial ideals so that any inheritance is used appropriately. This is also a good idea.
Early giving can save estate taxes
Your money might be liable to estate taxes, which would limit your children’s inheritance, and a posthumous bequest to them would go through a drawn-out legal process known as probate. Giving early helps you avoid probate and reduces the size of your estate. This can reduce your family’s tax burden and shield your bequests from potential legal issues.
You May Outlive Your Expectations
Nowadays, people are living longer. You could need to draw on your savings and assets for 30 years or more after retiring. You don’t want to run out of money and then have to rely on your kids for support. Therefore, before giving your children an early inheritance, you should carefully consider how much money to save aside for your later years.
Early giving may lead to family conflict
Do early deliveries cause ill will if you have more than one child? For instance, you might want to give each child an equal share, but if their needs differ, the less fortunate children may object to their wealthy siblings receiving “unneeded” money. If you provide different amounts to each child or perhaps exclude one or more children entirely, there can be even greater disagreement.
Be sure to look at your options before giving your children their inheritance early. Interest-free loans that are properly documented are a way to use wealth without giving it up to help the children start their own lives. The same goes for co-buying a home with them with an agreement for them to sell or buy you out in, say, 10 years, or guaranteeing a portion of their mortgage using your equity.
These options all have dangers that need to be carefully considered, but if done correctly with agreements drafted by a lawyer, they can all help achieve the same aim without drastically reducing your fortune.
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