Creating an estate plan is an ideal way to minimize the chances that your loved ones will fight over their inheritances. However, an estate plan does not always address two issues that may be important to you: watching your children enjoy their inheritance and helping those loved ones who may be struggling financially now.
For this reason, you may be among the increasing number of people who are choosing to give living inheritances. Even if this is your preference, it is wise to understand some of the legal ramifications of gifting your assets before you pass away.
Typically, those who opt to make a living inheritance have already created a plan or believe they have sufficient funds to get themselves through their retirement years. Instead of leaving their assets to their loved ones in a will or trust, they give them away for a variety of reasons, such as:
- Their children or grandchildren need money to buy a home or raise a family.
- They may feel they are better able to control the equal distribution of their assets.
- They want to ensure certain heirlooms end up with the heirs who will most appreciate them.
- They believe they can avoid disputes among the heirs by personally distributing their wealth.
- They don’t have to worry about tax penalties for gifting cash in Ontario.
It is important to understand that some living inheritance gifts, such as real estate, may leave you with significant tax burdens. Therefore, it is always a good idea to discuss any living inheritance with an experienced estate planning lawyer. You may learn that there are safer, more effective, options for providing your loved ones with gifts from your estate.