How Should I Divide Assets Among Heirs?

Divide assets
Please Share!
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email

How you divide your estate plan impacts your loved ones.

Parents who want to leave their assets to the next generation will have more decisions to make if they have more than one child.

If you have one child, he or she can be a solo heir without triggering jealously.

On the other hand, under other circumstances failing to create an estate plan and to communicate the reasons for your choices can lead to conflict and hurt feelings.

According to a recent nj.com article titled “What’s the best way to split my estate for my kids?,” several factors go into deciding how to divide an estate.

Divide assets after careful thought.
How you divide your assets will impact your heirs.

Some parents may choose to divide an inheritance based on need.

If you have a child with a successful career and more than enough to provide for his or her family and another child with no IRA or pension plan, you may choose to give more to the child with greater need.

Parents who have a child with special needs often consider this factor when splitting their assets.

The child will special needs may require more support, but how assets are inherited could trigger unintended consequences.

With an outright inheritance, you could disqualify your child from government benefits.

By creating a Third-Party Special Needs Trust, you can provide support without impacting the eligibility status of your child.

Another consideration when you divide your assets between heirs is the type of asset.

Unless the asset is an annuity or an IRA, it will currently receive a step-up in basis when you die.

What does this mean?

The increase in value from the time you purchased the asset to the day you died will not be taxed.

If your heirs to choose to sell the asset in the future, they will only owe a tax on the growth from the date you died to the date they sold the asset.

Depending on how you divide your assets among your children, some may owe greater taxes than others.

If you choose to gift assets in an attempt to qualify for Medicaid, timing is important.

There is a look-back period of five years when determining Medicaid eligibility.

Some people choose to divide their estate while they are alive.

This is sometimes called giving with warm hands.

You can gift up to $15,000 per person each year without filing a gift tax return with the IRS.

At this time, every tax payer has an exemption threshold of $11.7 million for estate and gift taxes at the federal level.

Once this is reached before or after death, gift and estate taxes will be owed.

If one of your children has medical or educational expenses as an adult, you can transfer money directly to the health care provider or educational institution without it being considered a taxable gift.

When choosing how to divide your assets effectively among your heirs, it is best to work with an experienced estate planning attorney.

Reference: nj.com (June 24, 2021) “What’s the best way to split my estate for my kids?”

Get All The Marketing Updates
Recent Posts
Categories
Search Our 2,400 Blog Post Archive