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Many wealthy Americans wonder whether they should give money to their heirs during their lifetimes or leave it as an inheritance. There are many aspects to the decision. However, if taxes are a concern, then it might be better to give the money now than to leave an inheritance.

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Some people struggle over whether they should give money now to family members so they can see the benefits of that money or whether it is a better idea to leave those family members an inheritance.

One important aspect to the decision is the potential tax consequences.

In neither case will the recipient have to pay taxes on the money. Nevertheless, as the Wills, Trusts & Estates Prof Blog explained, in a recent article titled “To Gift or Bequeath? That is the Question,” the recipient might receive more money if you give it to them now.

As the article explains, if you are in the 40% tax bracket and give someone $1 million today, you will be required to pay $400,000 in taxes on the gift. However, if you have precisely $1.4 million and leave it all to someone in an inheritance, then the entire amount would be taxed at 40%.

That would make the actual amount inherited $850,000, not the $1 million that could be gifted with the exact same amount of money.

Please contact our office today at 239-225-7911 to schedule an appointment with Barbara M. Pizzolato if you are interested in protecting your legacy and need to create or update your estate plan. You may also wish to attend one of our free seminars.

Reference: Wills, Trusts & Estates Prof Blog (May 4, 2015) “To Gift or Bequeath? That is the Question

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