Can you really ever have too much of a good thing?
When it comes to the estate and gift tax exemption amount, many heirs would be thrilled when $5.25 million is up for grabs. How could that be too much of a good thing? But some parents have a different answer; they believe that $5.25 million is just way too much of a good thing to leave as inheritance to their children.
The Wall Street Journal recently explored this subject in an article appropriately titled “Can You Trust Your Kid With $5.25 Million?”
As you likely are well aware by now, the recently enacted American Taxpayer Relief Act of 2012 (ATRA) sets the unified estate and gift tax exemption at $5.25 million per taxpayer (with a nearly “automatic” $10.5 million per married couple). Using certain estate planning “tools” (e.g., to make “discounted” wealth transfers) you can do a great deal better than that, too.
So, what do you think about leaving a "large" inheritance to your children, and when would it be too much, too soon? In most jurisdictions, in the absence of estate planning instructions to the contrary, your children would receive their inheritance outright at age 18 (or immediately if already older than age 18) without any restrictions, guidance or protection. If that is not enough motivation to make proper estate plans now, then little may do the trick.
Proper estate planning means providing the legal means to protect the inheritance both “for” and “from” your descendants. Have you ever noticed that some children “grow up” and others just “get older”? Accordingly, your planning should take into account the unique needs – and capabilities – of each of your children. And while you're at it, perhaps you might want to make provisions directly for your grandchildren. After all, many grandparents say had they known how much fun grandchildren are, they would have had them first!
When you make financial arrangements for your heirs, be prudent in your decision so that the inheritance is a blessing and not a curse. And don’t forget to consider a bequest to your favorite charity or charities, as well.
For additional information about this or your other estate planning questions, please contact us at Peak Legal.
Reference: The Wall Street Journal (January 18, 2013) “Can You Trust Your Kid With $5.25 Million?”