“Even if you’re not a millionaire, you may have reached a stage where you think, It’s enough. It could even be a bit too much. A second car may sit mostly in your garage. A beloved vacation home may have transformed from a place to relax to a place to maintain.”
You don’t have to be a millionaire to feel like you’ve got enough. How many cars, vacations or houses does anyone really need? If you’ve reached that point, congratulations. Now, what do you do about it? How do you share your resources in a way that is carefully thought out and doesn’t create a battle among family members? An article from AARP, “How to Give Your Money Away,” provides some good points.
A grandchild needs a college education. Use a 529 college tuition plan to help your grandchild, by contributing to a plan created by the child’s parent. Financial aid formulas look at contributions from a grandparent’s plan but not a parent’s plan as student income. To allow your grandchild to be eligible for student aid or grants, make sure that the funds you contribute go to his or her parent’s 529. Many states permit you to switch ownership to the parent, if the beneficiary remains the same.
You want to be philanthropic, even if you’re not Warren Buffet. You can use what’s called a DAF—donor advised fund. They are like charitable savings accounts. The tax deduction for any cash or investments placed in the fund is immediate, so you can front-load two or three years’ worth of giving into one year. You can also claim a charitable deduction for a year, when you intend to itemize instead of taking the new standard deduction. You can direct grants from the fund to any non-profit organization you choose and whatever timeframe you like.
One child is a smashing success, the other is a starving artist. Sometimes the disparity of incomes between children, can be a result of choice or abilities. Nevertheless, you may not wish to leave the exact same amount to both kids. One of your children might have a disability and needs special planning. It’s your call and it’s also your call whether to share all the details with your kids. Logic prevails in some families and there’s no drama over these kinds of decisions. Less information about their inheritance is better for others. You could insert a no-contest clause in the will to forestall any litigation.
You have visions of generations enjoying your summer cottage. Sometime this works out. However, sometimes the kids have no interest in the property and just want to sell it. Have that conversation first. If no one wants it, sell it when the timing works for you. If one kid loves the house and the others don’t care, work out the numbers so the house stays in the family, but the child receives a smaller percentage of assets. If the family wants to keep the house, work with an estate planning attorney to create an LLC (Limited Liability Company) and give shares to the kids. You’ll need an operating agreement, including how the cost of maintaining the property will be handled and what happens, if someone wants to sell their share. Define the universe of eligible owners as lineal descendants and not spouses, to forestall an ownership battle in the case of a divorce.
Talk with an experienced estate planning attorney about how to give away your assets in a way that will make sense for your family and gain useful tax benefits for your estate.
Reference: AARP (May 1, 2018) “How to Give Your Money Away”