Make Gift Giving Fair When Planning Your Estate
When our oldest child got married nearly 10 years ago, we gave the couple money to help them get started in life. This year, when his youngest brother married, we did the same thing, but we bumped the total up to reflect 10 years of inflation. My husband thought that was only fair. Make Gift Giving Fair When Planning Your Estate
Fairness is an important factor for many families when it comes to giving gifts, says Anthony D. Criscuolo, a certified financial planner for Palisades Hudson Financial Group, especially in families where some adult children need help and others just appreciate the thought. “At the end of the day, it is a philosophical debate on fairness versus equality,” Criscuolo says.
Accumulated gifts over time to grandchildren is an issue that troubles many of his clients, Criscuolo says. For instance, if you give each grandchild $1,000 every Christmas, the ones who were born first will accumulate much more than those who are born later.
The easiest way to solve the problem, Criscuolo says, is to end the gifts at age 18—and also adjust the amount each year for inflation—so the younger children receive effectively the same amount as the older ones. To ensure this plan works, Criscuolo suggests including provisions in your estate planning to equalize the gifts of younger children and even those who are not yet born.
“If you gave your grandchildren $10,000 20 years ago and you have a new grandchild who is just born and you are truly committed to equalizing, you have to take new additions and inflation into account,” he says.
Equality Doesn’t Equate to Fairness
In the new book he helped write, “Looking Ahead: Life, Family, Wealth and Business After 55,” published by Palisades Hudson, Criscuolo says that you might also consider including a special power of appointment in your estate documents. This tool grants your spouse, child or another individual the power to change the terms under which assets pass to your grandchildren via trust. These special powers can be used to adjust a bequest to a child with special needs or one who runs into financial difficulty, including bankruptcy or divorce.
Equality doesn’t always equate to fairness. Criscuolo says he has one client with three grown children, all of whom have children of their own. The client helps support two of the families, while the third child has been financially successful and his wealth far outpaces that of his parents.
“The wealthy son would actually prefer to receive nothing, but the parents want their bequest to be equal,” Criscuolo says. So he and the client worked with the wealthy son to include an option in the estate plan, so when the time comes, the wealthy son can
disclaim his inheritance and allow the assets to pass to his less well off siblings, nieces and nephews.
“If the wealthy son’s situation should change and he would like to keep the inheritance, he can do that. You never know,” Criscuolo says.
Reference: Jennie L Phipps, Bankrate.com (December 23, 2014)
Filed Under: Estate Planning; Gift Giving
Please visit our Estate Planning website for more information on this topic. If you have further questions and need help on this case, contact our lawyers at Pozzuolo Rodden, P.C. Law Firm today!