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Horizon Elder Law & Estate Planning Blog

Monday, August 24, 2020

Should I Give Gifts During My Life or Leave Them in My Will?

California elder law attorneys are frequently asked, “Should I give gifts during my life or leave them in my will”? The answer, “It depends.”

If you have a modest estate and are relying on the bulk of it to live, gifting assets during your life might not be a good idea. Even if you think it's a nice thing to do, future concern over outliving your assets will rob you of any gift-giving joy. In this case, it’s best to leave gifts in your will.

On the other hand, people with sizable estates who enjoy gift-giving often benefit from gifting assets during their lifetime. Aside from the emotional pleasure of gifting an early inheritance to your heirs, there are associated tax benefits as well. Let’s examine the benefits of giving gifts during your lifetime as opposed to leaving them in your will.

The Advantages of Giving Gifts During Your Lifetime

Helping a Loved One

When you pay the tuition or medical expenses of another person, you are giving a non-taxable gift to that person. Those payments may greatly benefit someone otherwise unable to afford higher education or exorbitant medical expenses.

Under the IRS education exclusion and medical exclusion, these gifts are not taxable to either the giver or the recipient. However, there are specific guidelines to these types of gifts and it's best to consult your elder trust attorney before making a financial commitment.

Reduce the Size of Your Taxable Estate in California

Any time you release an asset, you reduce the size of your estate and the taxes owed upon your passing. Gifts outside of your will allow your loved ones to enjoy the generosity you intend toward them, without paying the penalty of an inheritance tax.

Generally, gifts to a single recipient must be $15 thousand or less in a calendar year to avoid taxation. An experienced elder attorney will advise you regarding state and IRS gift-giving limitations.

By-pass Probate

The California probate process can be reportedly messy and protracted. Anytime you pass property, whether money, autos, or real estate directly to your future heirs during your lifetime, you are excluding that property from probate.

To ensure property transfers are executed correctly and in conjunction with the law, it's a good idea to talk to your California elder attorney.

The Federal Gift and Estate Tax Exemption

The 2020 federal lifetime gift/estate tax exemption allows you to give away up to $11.58 million over your entire lifetime, tax-free. This amount is a cumulative gift exclusion rather than a single exclusion.

Emotional Reward

For many, a driving push toward success is the dream to leave a financial legacy for those we love. In that regard, it seems a shame only to give gifts posthumously. Issuing an advance on inheritance during your lifetime can create a genuine, joyous, and irreplaceable emotional lift that you and the recipient both deserve.

Talk with an experienced California Elder Attorney Today

Balancing your own financial needs against your generosity isn’t always easy, and a heart’s desire can easily cloud one’s decision making. A qualified elder attorney can help.

For an honest assessment of your California estate and a better understanding of the tax code related to early gifting, reach out to a California elder law attorney today.


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