CONSIDERATIONS TO KEEP IN MIND WHEN GIFTING TO CHILDREN
Feb. 6, 2017
California residents who want to reduce the size of their estate and help their children by using gifts should make sure that they do so strategically. For example, parents might want to help their children buy a home by becoming joint owners, but if they do so, they should make sure children do not rely on them to keep paying the mortgage.
Parents might also think that a joint account is an easy way to make sure their child always has access, but this can create complications. A power of attorney is a better way to allow that access if the parent wants the child to manage the money while they are alive. If they want to pass the account on to their child after their death, they can name the child as the beneficiary.
For tax reasons, parents should gift children assets that have not appreciated much while they are alive and save the significantly appreciated assets to pass on after their death. If a parent's will passes assets on to a minor child, an adult will be appointed to manage the money, but the child might still be irresponsible with the money after turning 18. A trust can help protect assets in this situation and can also be used to protect assets if the child's marriage is unstable.
Estate planning might become particularly complex if a person has substantial assets, a blended family or other situations such as a relative with special needs. In cases like these, a will might not be sufficient. Individuals might want to consider a trust or other vehicles to ensure that assets are carefully managed after their death. They should also update their estate plan after changes in their assets or family so that it remains current.