December 06, 2024
Allworth financial advisor Dan Rausch, CFP®, explores five innovative strategies for gifting wealth to your heirs, offering thoughtful ways to create lasting value while minimizing taxes and maximizing impact.
When it comes to sharing your wealth with your heirs, it’s about more than just handing over money. For many high-net-worth families, gifting is an opportunity to pass on not only financial security but also values, opportunities, and a lasting legacy. The key is to do it thoughtfully and strategically—making sure your gifts provide the most benefit while minimizing unnecessary taxes or complications.
Here are five innovative ways to gift to your heirs that go beyond the traditional check in an envelope.
If your goal is to teach financial responsibility while gifting wealth, a family investment account can be a great tool. By opening a joint investment account or creating a custodial account for your heirs, you can involve them in the process of managing and growing their inheritance.
Use the opportunity to teach them the basics of investing, budgeting, and long-term planning. Not only does this transfer wealth, but it also equips your heirs with skills they’ll use for a lifetime.
Bonus tip: You can fund this account annually, staying within the annual gift tax exclusion limit (currently $18,000 per individual in 2024) to avoid triggering gift taxes.
Even if your heirs are young, contributing to a Roth IRA on their behalf can be an incredibly impactful gift. The contributions must be based on earned income (like part-time work for a teenager), but the long-term tax benefits are significant.
Why is this a great gift? Because the money grows tax-free, and withdrawals in retirement are also tax-free. Over decades, this can create a financial safety net far greater than a lump sum gift. It’s a forward-thinking way to provide for your heirs while encouraging them to save for their own future.
Education is one of the most meaningful gifts you can give. By funding a 529 college savings plan for your heirs, you’re not just covering tuition—you’re opening doors to opportunities that will impact their lives forever.
529 plans offer tax-deferred growth, and withdrawals for qualified education expenses are tax-free. And here’s the kicker: recent rule changes allow unused funds in a 529 plan to be rolled into a Roth IRA for the beneficiary (subject to limits), giving this gift even more flexibility.
If education is a cornerstone of your family’s values, this is one of the most efficient ways to support your heirs while reducing your taxable estate.
An ILIT is a powerful tool for gifting while preserving your wealth. Here’s how it works: You create the trust and transfer a life insurance policy into it. Upon your passing, the death benefit is paid directly to the trust, keeping it out of your taxable estate.
This approach can provide liquidity for your heirs to pay estate taxes, settle debts, or manage other financial obligations. It’s also a great way to provide your heirs with a substantial, tax-free inheritance while maintaining control over how the funds are used.
For families with significant estates, an ILIT can be a cornerstone of a comprehensive wealth transfer strategy.
Sometimes, the most meaningful gifts aren’t financial—they’re the memories you create together. For families that value connection and shared experiences, consider gifting in the form of family vacations, retreats, or unique learning opportunities.
These experiences allow you to spend time together while imparting values, traditions, and lessons that are harder to quantify. Whether it’s a multi-generational trip to explore family heritage or a retreat to discuss the family’s long-term vision, these moments can leave a legacy that lasts far beyond material wealth.
Gifting to your heirs is about more than transferring money. It’s about shaping their futures, instilling your values, and building a legacy that will endure for generations. Whether you’re funding a 529 plan, creating an investment account, or giving the gift of experiences, each of these approaches offers a thoughtful, impactful way to support your heirs.
If you’re ready to discuss how these strategies might fit into your overall estate plan, let’s connect. Together, we can craft a plan that reflects your goals and ensures your gifts have the lasting impact you intend.
As a certified financial planner with both tax planning and CFO experience, I understand how complex financial situations require an intentional approach. I’m passionate about educating you to make sound decisions because I understand what’s at stake for you. Wealth management is more than choosing the right investments. It also involves deliberately preserving your wealth, so you feel confident in your tax strategy and family estate plan.
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The information presented is for educational purposes only and is not intended to be a comprehensive analysis of the topics discussed. It should not be interpreted as personalized investment advice or relied upon as such.
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The information is not intended to convey any implicit or explicit guarantee or sense of assurance that, if followed, any investment strategies referenced will produce a positive or desired outcome. All investments involve risk, including the potential loss of principal. There can be no assurance that any investment strategy or decision will achieve its intended objectives or result in a positive return. It is important to carefully consider your investment goals, risk tolerance, and seek professional advice before making any investment decisions.