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Why gifting your assets isn’t always advisable

On Behalf of | Nov 19, 2023 | Uncategorized

Transferring assets to loved ones as gifts might seem a viable alternative to achieving your estate planning objectives. After all, it allows you to pass on your estate to loved ones, just like you would with a will.

However, gifting your assets can lead to negative unintended consequences that might significantly impact your legacy. Below are some of the potential drawbacks.

Loss of control and access

Relinquishing ownership of your assets means surrendering control and access. In other words, you are no longer considered the legal owner. Unforeseen circumstances, like sudden health issues or financial emergencies, could leave you vulnerable without the resources you once had.

Tax implications and complexities

Gifting assets to loved ones can have significant tax implications and complexities that need careful consideration in estate planning. For instance, there are limits on the value of gifts that can trigger the gift tax, which can take away from your estate.

Exposure to risks and liabilities

Assets transferred as gifts might face unforeseen risks, such as legal liabilities from creditors or legal disputes involving beneficiaries. Such vulnerabilities could jeopardize the intended security of the gifted assets.

Additionally, the sudden wealth through gifting can overwhelm beneficiaries, leading to irresponsible financial choices or family disputes. Proper financial education and preparation are often lacking when assets are gifted abruptly, potentially causing more harm than good.

Striking a delicate balance

Estate planning demands a delicate equilibrium between securing your future and ensuring a seamless transfer of assets. Solely relying on gifting as a strategy can make it difficult to attain this balance. Seeking legal guidance can help you find a more comprehensive approach tailored to your situation and estate planning goals.