(Feb 3, 2025, Princeton, NJ) — Should you give your heirs their inheritance now?
“This is a question that many of our clients wrestle with,” says Howard Hook, CFP, CPA, Principal and Senior Wealth Manager at EKS Associates, a fee-only financial planning firm in Princeton, NJ. “Each client is different, but we have them look closely at the pros and cons for themselves and their children and advise them of tax consequences before they make any decisions.”
Giving away assets during your lifetime can be particularly meaningful for a child and rewarding both personally and financially for a parent. Getting this financial support may mean far more now than years in the future, if an adult child needs it for, say, starting a business, buying a home, or repaying a school loan. Meanwhile, as a parent, you get the reward of seeing how that money makes a difference. You also get a chance to see how it’s used – which may include choosing to put that money in trust.
At the same time, says Hook, you can’t put the proverbial toothpaste back in the tube – i.e. give away money you might need at some time in the future for yourself. “With people living longer, it’s not unusual to live 30 or more years after retirement,” he says. “Will there be enough for your needs? You don’t want to outlive your money and then need to depend on your children for help.”
Giving earlier can also, in some families, create unnecessary drama. Providing one child with, say, a sizeable gift to purchase a home while expecting the other child, who may not have an immediate need for the money, to wait until you die to receive their inheritance, may cause problems.
Tax implications, he adds, also need to be considered. In 2025, the IRS allows an individual to gift up to $19,000 annually without having to file a gift tax return and in rare cases incurring a gift tax By giving early, very wealthy people can reduce the size of their estate.
“We help clients start the process by discussing their options and deciding how much they can comfortably afford to give during their lifetime,” he adds. “We also encourage them to have open conversations with their children.”
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