Should You Give Away An Inheritance While You’re Still Alive?

Many people plan to leave an inheritance for their loved ones, but a growing number are considering gifting assets while they’re still alive. This decision comes with both emotional and financial factors . Let’s explore the pros and cons to help you decide whether it’s the right choice for you.

The Benefits Of Gifting Early

1. Witnessing the Impact: One of the most rewarding aspects of giving an inheritance while alive is seeing the positive effect it can have on your loved ones. You can help fund education , buy a first home, or support a passion project—all while being present to share in their joy.
2. Tax Advantages: Early gifting can also help reduce the size of your estate and, in turn, potentially lower estate taxes. In the U.S., individuals can gift up to $17,000 per person annually without triggering gift taxes (as of 2024). Larger lifetime gifts may also count against your federal estate tax exemption, but consulting with a financial advisor is key to understanding the rules.
3. Family Harmony: Spreading out gifts while you’re still alive might help avoid future conflicts over inheritance. By having open discussions about your intentions, you can set clear expectations, minimize disputes, and ensure everyone feels treated fairly.

The Drawbacks Of Gifting Early

1. Financial Uncertainty: Giving away too much of your wealth early can leave you vulnerable in later years, especially if unexpected healthcare costs arise. It’s essential to have a clear financial plan to ensure that you don’t outlive your resources.
2. Tax Complications: While gifting can help reduce estate taxes, it’s important to be aware of gift tax rules. Larger gifts may require tax filings and could count against your lifetime estate tax exemption. Failing to navigate these complexities properly could lead to tax penalties for both you and your beneficiaries.
3. Potential Misuse of Funds: There's always a chance that your loved ones might not use the money wisely. Once the gift is given, you no longer have control over how it’s spent, which could lead to unintended consequences.

Finding The Balance

For many, a hybrid approach works best—giving smaller gifts while reserving a portion of the estate for after passing. This way, you can enjoy the satisfaction of helping loved ones now while maintaining financial security for your future.

Before making any decisions, consult with a financial planner or estate attorney to ensure you’re taking the best steps for your unique situation.

By Andrew Rosen, Contributor