• Making a Legal Gift: How to Start Gifting During Your Lifetime

    Making a Legal Gift: How to Start Gifting During Your Lifetime

Though most people plan to bequeath assets after they are gone, there is another option. The other option is to make legal gifts of your assets during your lifetime. Commonly known as “giving while living,” it’s a strategy that provides several benefits. One of the primary benefits is that it allows you to have a greater degree of control over how your assets are used. Another major benefit is your heirs pay less in federal estate taxes when you make legal gifts. The maximum you can give in your lifetime without paying taxes is $11.58 million as of 2019. So, what do you need to know when considering making legal gifts?

Making a Legal Gift

Barriers to Making a Legal Gift

The big question to answer is when and how to transfer gifts to your heirs. According to this article, 61% of Americans say that they plan on transferring assets after their death. Only 25% intend to gradually transfer their assets during their lifetime. Compare that to the 35% in the UK and 30% in Canada.

This is due to several barriers. Some barriers include:

  • Fear of pulling the trigger
  • Feeling that funds may not be sufficient
  • Lack of knowledge about living giving

Living Giving

The best way to start making legal gifts is to give small amounts of wealth to heirs or charity now. In the US, individuals can give up to $15k annually and $30k for married couples to an unlimited number of recipients without paying taxes on those sums. After that the federal gift tax is imposed, the current rate is 40%.

Some gifts, like direct educational, medical, and charitable giving, are excluded from the annual gift and estate taxes. There is no limit to how many of these such gifts you can make every year. 

It is also possible to make large donations by establishing a private foundation for your family. If you wish to donate smaller amounts, a donor-advised fund may be the way to go.

Establishing a Trust

One strategy for making a legal gift is to create a revocable trust. Also known as a living trust, this enables the benefactors to maintain control of assets during their lifetime. You can name trustees in the event that you become unable to manage your own assets. Because the trust is revocable, you can update it at any time. 

An irrevocable trust is another option to transfer wealth while minimizing taxes. With this option, you can make legal gifts to the trust instead of outright individuals. With this option, you preserve your wealth by enabling benefactors to halt the value of appreciating assets in their estate and shift that appreciation to inheritors at the point of their death to minimize estate taxes.

Don’t let the future catch you off guard and start planning today with this FREE eBook, Plan the Future for You and Your Spouse’s Long-Term Care.

Confident Living is a continuing care at home membership program, focused on helping you remain active and independent as you age in your own home. We serve the greater Cincinnati area. For more information, contact us online or call (513) 719-3522.