Creative Ways to Gift to Children and Spouses

Christmas holiday time is one when most of us think of gift giving. There are ways, longer range, to consider gifts to family and friends. Most clients know when planning their Wills who they want to name as their primary or most important beneficiary. They do struggle, though, sometimes for years, as to how to benefit others further down the line. There are ways to remember other beneficiaries during life and at the time of your death.

Remembering children on your death. For married couples, using the typical Husband to Wife, Wife to Husband Wills, with remainder going to the children when the second spouse dies, children do not inherit until both parents die. Note that the surviving parent today might live to be over 100 years old before their children inherit. Spouses either are satisfied with this result, do not realize this, or do not know how to handle this circumstance in any other way. If a parent wants to benefit his or her children, especially those by a prior marriage, he or she might consider some distribution to children on the first death for at least a portion of the estate.

Where this is a second marriage, distributions may need to be considered carefully. Will the children by your first marriage be resentful if you leave everything to your current spouse? Possibly some portion of your estate or some sentimental items could be left to them on your death even if your current spouse is still living.

The favored child.  Taking another example, widows and widowers favoring one child over others might tread on dangerous ground unless that child performed services over and above their siblings and the others recognize it. There are alternatives that can reward that child even if the Will on its face might state that it leaves assets equally.

Here are some suggested solutions.

  • Family Agreement – Where one or more children contribute substantially more to help aging parents, a written pay-as-you-go agreement may help to adequately compensate them during your lifetime.
  • Beneficiary Designations or Payable On Death Accounts. A quiet way to benefit those who help the most might be by making that person the beneficiary of life insurance or of an IRA or other asset. The Will could still say equal division to the children but the parent can effectively reward a child who has been most helpful. Life insurance to a child has an added benefit since it is the only asset on which there is no inheritance tax.
  • Gifting During Life. Individuals who want to pass on something of themselves as reminders might consider gifting memorable items during their lifetime. Jewelry and personal belongings can easily be gifted. If their aggregate value does not exceed $14,000 – $15,000 next year -to any one individual in a given calendar year, no gift tax return needs to be filed and, even for more valuable items, the filing of a gift tax return except for extremely large amounts and valuable assets does not require paying any tax.
  • Memoranda Under the Will. When I first practiced law, persons writing their Wills often included long lists of personal items they wanted to pass by Will. These were cumbersome and needed to be updated regularly. Today, more often, Wills contain a provision that a Memorandum may be added to the Will designating certain items to certain persons. The Memorandum can be easily removed and replaced with another without needing to redo the Will.

Specific Bequests. A specific bequest in a Will designates specific property to designated individuals. It could be an actual dollar amount as in “I devise $10,000 to my Cousin Mary” or could name certain property or accounts. If specific property is named, it must be in existence at the time of death in order to pass to the beneficiary. If, for instance, the maker of a Will states that his car should pass to son, John and then sells that car, the gift lapses. If the maker wants any automobile that he owns at the time of his death to pass to John, then he should state “or any car that I own at the time of my death.”

These resolutions require time and thought but can be well worth the effort.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

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