Someone recently wrote in to the MarketWatch advice column with an interesting question about parents who are willing and able to make gifts now versus waiting until they have passed away to pass on their wealth. It’s a good reminder of two critical aspects of estate planning — communicating your intentions to your loved ones and taking advantage of the annual gift tax exclusion.
An Interesting Question
“Snubbed” wrote into the Moneyist to ask for advice after her sister was given $75,000 to pay off some debts after grad school. The letter writer says her parents have promised to leave her an extra $75,000 in their estate plan, which otherwise divides their estate evenly between the two sisters.
Snubbed rightful thinks that $75,000 will be worth significantly less when her parents pass away than it is today because of inflation. She also suggests that she could use the money now to put a larger down payment on the house she and her husband are buying, start a college fund for the child she is expecting, buy a car, or invest. She wonders if it would be okay to ask her parents for the money now.
The Moneyist points out that the letter-writer is not entitled to any of her parents money, now or in the future. But suggests that it would be okay to ask for the money now since it sounds like her parents are able to afford such a gift, and she has concrete plans for what to do with it. He also cautions her not to let her parents’ generosity sow discord between her and her sister.
Communication is Key
The Moneyist’s advice is well-reasoned, but he should have emphasized how important it is to have open lines of communication between loved ones about estate planning. If the letter-writer wants to know what her parents would think about giving her money now, she should ask them!
Speculation and secrecy is what leads people to feel “snubbed” even when their family members are being quite generous, and are doing their best to be fair about it.
Families should be as open and honest about their estate plans as possible. The attorneys at our firm are happy to help clients explain to their loved ones exactly how things are set up to work if that would be helpful.
Gifting Pays Dividends
The second thing missing from the Moneyist’s response is a reminder that gifting is an important part of many estate plans. Under the current federal tax code, each person is allowed to gift $15,000 to as many individuals as he or she would like without being taxed on that amount. Couples can double the exclusion and pass $30,000 per person, per year, tax free.
Families who are planning on passing substantial amounts of wealth at their death should consult with a financial advisor and an experienced estate planni
