Passing on assets to children is something that all parents think about at some point in their lives. There are many ways to do this – often through the use of a trust or a will. But some parents are also thinking about giving adult children some of their money while they are still living. There’s a lot to consider first.
The Wall Street Journal spoke with three financial advisers to discuss transferring wealth while parents are still living – Michael Garry, founder of Yardley Wealth Management in Yardley, Pa.; Jacqueline B. Roessler, certified divorce financial analyst at the Center for Financial Planning in Southfield, Mich.; and Tony Walker, a retirement-planning specialist in Louisville, Ky.
Thinking about family needs and goals
Discussing the effect of the pandemic on gifting assets, Garry said most of his clients were in better shape financially than a year ago, but that was not the case with their children and grandchildren. Roessler said some of her older clients have said they are prepared to make adjustments in their gifting strategy.
All three advisers agreed that parents need to consider their own financial needs first. Garry said he believes “strongly that parents should dole out money while they are alive and not stockpile it any more than they need to for their own financial security.” Roessler noted parents need to make sure to “cover their own financial needs, including any potential long-term-care expense.”
Walker said that before parents gift any money, they need to have a frank talk about their finances with their children. Garry said that their needs to be a discussion about expectations, and Roessler noted the importance of both spouses being on the same page about giving money to their children.
Addressing concerns about whether children would be responsible with the money, Walker pointed out that “there’s only one way to find out.”
Planning for the future
Before making any decisions on transferring your wealth, it’s a good idea to speak to an estate planning attorney. Many families have started to think about passing their wealth onto their children. They may not be sure how to go about it, however. An experienced lawyer can discuss your goals, advise you on your options for wealth transfer and help you prevent future problems.
Some of the things to consider before gifting assets include:
- What are my financial needs while I’m still living – now and in the future?
- What are the tax implications for giving money to my children?
- How can trusts help me transfer assets to my children?
Attorney Yuka Hongo of Hongo Law Office, LLLC makes the difficult process of estate planning easier for families, serving clients in Hawaii and Japan. She understands the laws related to estate planning. Attorney Hongo can help you develop a plan to distribute your assets that meets your goals. She was born in Japan and raised in a bilingual setting in the United States. She helps many clients overcome the language and cultural barriers that make estate planning challenging.
It’s never too early to start planning your legacy. Contact us today to schedule a consultation.