A Publication of WTVP

Throughout our lives, we invest great energy in making life better for our families. So it’s only natural that we would also search for ways to simplify the details and decisions our loved ones will have to face when we die. That selfless motivation induces many people to determine-while they’re still living-how their assets will be distributed after they pass away.

One common decision is to gift assets to children or others. Although gifting is an efficient way of transferring assets without estate tax or probate costs, there are many things to consider before you make these gifts. For instance:

Gifting can be an effective way of reducing your estate taxes if your estate is large and if you can afford to give away an asset. But if there’s even a remote possibility you may need that asset later, think carefully before you make a gift.

Beneficiary designations are a common method for earmarking assets for beneficiaries without actually distributing the asset until death. You can name a beneficiary on insurance policies, IRAs, retirement plans and some bank accounts (called Pay on Death Accounts), and even on stocks and mutual funds (called Transfer on Death Accounts) When you die, these assets can bypass probate court and be paid directly to the person(s) you’ve named.

Before you name your beneficiaries, think objectively about how effectively your potential heirs are able to handle significant sums of money. How well have they managed finances historically? Will they make poor investment decisions or be influenced by a spouse or others?

Once you’ve thought through your options and determined who you will name as your beneficiary, be aware that certain situations can interfere with the smooth implementation of your beneficiary designation plans.

On top of these issues, there are some very important tax issues to consider when naming beneficiaries of your IRAs. Deciding who will receive your assets and how they should be distributed when you die is a difficult task, but by arming yourself with this information and establishing the appropriate distribution mechanisms, you can have the comfort of knowing your assets will go where you want them. And you’ll achieve what every parent strives for: to make their children’s lives a little easier.

To explore your estate planning options, contact a personal trust advisor at a financial institution or consult with an attorney who has trust and estate planning experience. iBi