Post by Myra Salzer
Recently, I’ve had a lot of interest by various groups interested in hearing me speak about the mistakes I have seen in both giving and receiving gifts/wealth. Since this is a topic of interest to many audiences, it seemed appropriate to write about it in a series of blogs covering common mistakes. I’ll begin with…
Mistake #1 – Tax Motivated
It happens all the time! The lawyer advises you to create a structure like a family limited partnership, where you can give shares to children at a discounted rate while still maintaining control. Sounds great, doesn’t it? Vehicles like this can ultimately save millions of dollars in transfer taxes (gift and estate tax). While saving taxes might feel great to the wealth holder, the beneficiary(ies) might not see it that way. It can feel to them as though they are being used as a tax-savings vehicle rather than a valued recipient of a precious gift.
Don’t get me wrong, I’m not about paying more tax than necessary. I’m just saying that for the beneficiary to be empowered by a gift, the manner in which it is given is very important. Wealth holders, please take time to explore possibilities with your adult children BEFORE it’s a done deal. They should be included in the process and given an opportunity to provide input. What works for one child might not work for another. By giving assets that your children can’t control, you might be hindering them from being able to get medical insurance or financial aid for their children’s college expenses, for example.
Ideally, you have financial advisors who know the big picture of both generations, and can act as facilitators and interpreters so communication among wealth holders, beneficiaries, accountants, trustees, attorneys, etc. can transpire smoothly. Above all… AVOID SURPRISES!
