Ask These 5 Questions Before Gifting Assets

Gifting assets can be a useful estate planning tool if you need to reduce your estate tax bill or for long-term care planning purposes. However, you need to be sure that your gift does not cause any unforeseen problems for you or the person receiving your gift.

Here are five questions you should ask yourself before gifting:

Why is the gift being made? Are you making a gift out of love or is there some estate planning goal you are trying to reach? If it’s the latter, you need to be sure that the transfer of assets will be beneficial to you and your recipient. For example, if you are counting on Medicaid to pay for some of your long-term care, a gift could trigger up to five years of ineligibility unless handled correctly. Contact us or your own personal lawyer to evaluate your options.

Are you keeping enough for your needs? If you are making a large gift, you will need to do some long-term financial planning to ensure your gift does not compromise your future needs.

Are you expecting repayment? If your gift comes with an expectation on your part that you will be repaid, be sure your recipient understands that the gift is coming with these strings attached. Execute a promissory note so all parties are clear on the terms of your gift.

Are you expecting something else in return? If you are gifting property with the expectation that you will be allowed to live there, or gifting assets for someone else to hold for you, you should consider using a trust for these purposes instead. If you don’t, the recipient is legally in control of the gift and if they don’t do what you want with it — or worse, your assets become entangled in a divorce or bankruptcy — this could cause huge problems for you.

Will the recipient benefit from your gift? If your recipient has special needs, a gift could disqualify them from receiving important benefits. If he or she has financial or other problems like alcohol or drug dependency issues, the gift could be detrimental.

One of the best ways for you to gift assets is through a Wealth Creation Trust, which allows you to decide the best time for children or grandchildren to receive your gift and gives them the necessary time and experience to learn how to protect and grow the assets in the trust for future generations.


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