8/20/2016

WhyMakeYourHeirsWait?

Why Make Your Heirs Wait?

Giving your children their inheritance now, instead of passing it on in the will, can be very satisfying. Here are
some things to consider before fast-tracking your legacy.

TURNS OUT YOUR GRANDSON, the computer geek, wasn't wasting all that time on the couch with his laptop aer all.
Now he's got a killer mobile app and is working day and night to launch his own company. Or maybe your daughter has
just nished her Ph.D. in microbiology and wants to become a founding partner in a biotech startup. Then there's your
favorite grandniece, who's going to need a private coach to take her love for gure skating to another level.
Even if you always thought of your nancial legacy as something you'd leave your family aer you're gone, real life
needs keep popping upneeds that could be met if you were willing to give now instead of waiting to pass your legacy
on in your will.
In fact, many people are making the choice to give now. According to a 2013
Merrill Lynch retirement study, Family & Retirement: The Elephant in the
Sixty percent of people 50
Room, 60% of people age 50 and older would prefer to give sooner rather
and older would prefer to
than later, saying they want to be there to enjoy helping their children
give sooner rather than
pursue their dreams. Women in particular favor that approach, with 65%
later, saying they want to
saying they'd rather pass along an inheritance during retirement, compared
enjoy helping their
with 53% of men who feel that way. Additionally, tax laws that once favored
children pursue their
gis through wills now make it just as easy to transfer assets during your
dreams.
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lifetime. But for lifetime giving to be successful, there are some important
issues to consider.
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issues to consider.
"You've got to think carefully about the benets and the potential risks of transferring your wealth now, for both yourself
and your children," says Michael Liersch, head of Behavioral Finance at Merrill Lynch Wealth Management. He
recommends asking yourself the following three questions before you rewrite the will.

Fast-tracking Your Legacy: Three Things to Consider

If I give to one, must I give to all? Some of your children may prefer to wait for their inheritance, while others
could benet greatly from having the money now. "The right approach to giving may be dierent within each family,
with dierent individuals having dierent needs," says Liersch.
For instance, if your grandson's startup requires seed money to be able to beat the competition to market, and other
investors are hard to come by, giving him his entire inheritance now might make a lot of sense. You'll get the
satisfaction of seeing him invest in his future. And he won't have to defer his dream. But consider, too, how other family
members may feel about the gi, and what their immediate needs are. Talk with everyone, and make it clear that giing
now could aect how much they will receive later on, in your will.

Tax laws that once

favored gis through
wills now make it just as
easy to transfer assets
during your lifetime.

Is it a gior a burden? Larger gis, in particular, sometimes bring

unwanted responsibilities. Ask yourself: Does your daughter want to run the
family business? Does your son feel well suited to manage your private
foundation? If, for example, you give one child control of a trustand
discretion over distributions to other family memberscould you be
thrusting that child into an unwelcome position?

Am I over-giving? Before you give, determine what you need for the rest
of your lifeand make sure you've set those resources aside. Otherwise, you
may shortchange not only yourself but the very family members you're trying to help. You don't want to put them in a
position of having to support you later on. Liersch notes that this is a major concern for many families, with parents or
grandparents giving away more of their wealth than they should and then nding themselves without enough money to
support their lifestyles.
For some people, the best approach is to give both now and later, Liersch adds. "That way you can start small and rene
your intent. Then, if you choose to leave a legacy in your will as well, you can really articulate what you want in a way
that gives you condence that it will be carried out in a productive way."

Giving Now or Later? The Tax Facts

To the IRS, the timing of your generosity makes little dierence. The U.S. tax code makes it pretty easy to give
your children money, stocks or a piece of the family businessand it doesn't matter whether you make the gi
during your lifetime or through your will. In 2016 you can transfer $5.45 million without gi or estate taxes .
(That amount is currently indexed to ination, so it's expected to rise in future years.)
You're also free to give $14,000 annually to as many people as you like without owing current taxes or using up
any of the $5.45 million . Plus, all of those amounts are doubled if you're making a joint gi with your spouse.
So suppose you and your wife establish a trust for your three children and fund it with shares of your company
SEEcount
WHAT
ITS LIKE
TOamount
BE A MERRILL
worth $4 million. You can
$84,000
of that
as tax-freeLYNCH
annual CLIENT
gis to the three kids (three times
$28,000), and use the $5.45 million exemption to cover the rest. You still have more than 1.5 million dollars of

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$28,000), and use the $5.45 million exemption to cover the rest. You still have more than 1.5 million dollars of
your exemption le to reduce or eliminate taxes on any future bequests. And, of course, what you give now will
reduce the size of your estate.

3 Questions to Ask Your Advisor

1. Are some assets more tax-ecient to give than others?
2. How do I transfer the family business to my heirs?
3. What should my children know about managing the money I give to them?

Connect with an advisor and start aconversation about your goals.

Give us a call at
1.866.706.8321

9am - 9pm EST, Monday - Friday

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