Many people who intend to leave their wealth to children and grandchildren assume they can only do so when they pass away. The problem with a traditional inheritance is that you won’t be around to see your family enjoy it. Sometimes, you may want to help out a family member facing a difficult time now instead of down the road.
The good news is that there are ways to distribute your wealth during your lifetime. These “nontraditional” inheritances allow you to help out family when you want to (or when they need it) and see the benefits. In addition, lifetime distributions can reduce the size of your estate, which can help avoid hefty estate taxes. The most common option is through gifting: you can gift up to $14,000 each year to each individual family member (and your spouse can gift the same) without incurring gift taxes.
However, there can also be drawbacks to making distributions during your lifetime. The biggest concern is that you give so much you’re unable to support your own needs and those of your spouse. Before you begin making distributions, you should seriously consider if you can afford to. Unfortunately, many people make lifetime distributions only to find they can’t afford their own long term care or other expenses.
If you decide you want to distribute part of your wealth during your lifetime, it’s important to plan those distributions just as you would plan traditional inheritances. Discuss your decisions with family members so they understand your choice (especially if you aren’t making gifts to everyone) and know what to expect. With a little planning, you can easily accomplish your goal of sharing your wealth with family now, while making sure you can meet your needs later.