Are you asking yourself what you should leave behind, to whom, and how much?
We all ask these questions at some point, and there isn’t a one-size-fits-all.
For many, building wealth is intertwined with leaving a legacy for future generations.
This often means focusing on estate planning, a complex process to pass on assets after death.
However, a growing "Giving While Living" trend challenges this traditional approach.
Instead of waiting, it encourages sharing wealth during one's lifetime, offering financial and emotional advantages.
Here are the financial advantages of this:
- You can yearly gift a certain amount tax-free: currently $18,000.
- The current federal estate tax exemption lets you transfer up to $13.61 million in 2024 without owing taxes per person.
The federal estate exemption may reset back to $5 million in 2026. But what happens if that number shrinks significantly more in the future?
With rising government spending, many experts predict estate tax exemptions could be reduced to raise revenue.
You can take advantage of today's exemption levels and avoid higher taxes by giving strategically while alive.
This is just one benefit of the "Giving While Living" approach.
Simplifying Your Legacy
After accumulating a certain wealth level, you will need a trust structure.
This implies lawyer fees, accounting fees, annual reports, and more bureaucracy and complications.
At that point, someone has to manage your estate and the trust, which incurs time and costs.
For example, if one person dies with $20 million, with the current $13.61m tax exemption, 6.39 million could be exposed to taxes.
This is where most estate planning talks about insurance.
This can increase costs or complicate things, which is another reason to keep giving.
Where is the advantage of this?
Keeping your estate to a minimum simplifies your life and greatly impacts your relatives by helping them out along the way. Beyond the financial advantages, you can also:
- Minimize family disputes: divide assets while alive, with transparency;
- Avoid costly legal structures;
- Eliminate the need for life insurance policies that cover estate taxes.
There is also an emotional aspect that's more valid than everything. In the end, how will you measure your life?
For me, it's all about happiness and joy. So with the "Giving while Living," you can:
- Experience the joy of giving, witnessing the real impact of your gifts;
- Create a legacy in real time and support others' dreams.
How to Implement Giving While Living
So, how do you take action today?
I'm among those figuring out how to do that process, so we're doing this together.
Young adults like myself are contemplating estate planning and deciding whether to leave an inheritance for their children.
A simple answer would be to start gifting an amount up to the yearly limit ($18K).
Those gifts could go towards their investments, starting a business, or even self-education.
Putting the "Giving While Living" philosophy into action doesn't have to be complicated. Here's how to start:
- Determine if you have excess money. Have you saved enough for retirement? If not, don't even consider risking your savings by worrying about it.
- Start with a Plan: consider your overall financial goals, the assets you wish to gift, and who you want to benefit.
- Consider Professional Advice: If you feel your estate is more complex than you can handle, hire a financial advisor or estate planner to handle the hassle.
Conclusion
Unless your self-worth is about measuring how rich you get, gifting along the way has a greater impact on yourself and others.
If not for your kids, you can even do it for your parents as a great way of giving back.
Start the conversation with your trusted advisors and explore how you can thoughtfully share your wealth while shaping your legacy.
