Benefits of Gifting your Estate Assets Before Death

People often hold onto their assets until death, giving them to loved ones, friends, and charities through a will. Though will writers commonly retain possession of their assets until passing, they should consider gifting cash or other assets before death. This enables the gifted assets to avoid probate fees. In Canada, gifts are tax-free.

Before gifting, create a detailed financial plan, outlining expected lifetime expenses. Prioritize personal needs and wants, as it is your estate and assets. Will writers should be careful to only gift assets that they will not want or need to support themselves in their lifetime. Gifting before death should only be used as a means of using excess estate assets, after you’re certain you can provide for yourself for the remainder of your life.

Advantages of Gifting Before Death

Ultimately, beneficiaries receive their inheritance, whether before or after your death. So, what’s the difference between beneficiaries receiving the funds before or after your death? There are many different benefits to gifting estate gifts before death. As mentioned above, the most important benefit to the majority of people is the reduction of probate fees.

Saving Money

Gifting during one’s lifetime can result in significant savings in fees, which can be passed down to the beneficiary.

Consider this example: A grandmother with $1,000,000 in cash assets anticipates spending only $100,000 for the remainder of her life. She gifts $900,000 to her beneficiaries and passes away the next day. Since BC probate fees are about 1.4% of an estate’s value, her estate would pay $1,400 in probate fees on the $100,000. The $900,000 gift incurs no probate fees or gift taxes. If she hadn’t gifted the money, the entire $1,000,000 would face probate, and the estate would pay approximately $14,000 in fees—an extra $12,600 cost.

You Get to Watch Loved Ones Enjoy the Gift

Some may find joy in watching family members use their inheritance. Monetary gifts can benefit young adults starting school, buying a home, or launching a business. The gift offsets costs, and the giver sees the positive impact on their loved ones’ lives. Further, gifting physical assets like land or high-value personal items can also have the effect of reducing probate fees and provide sentimental value for the gift giver.

Aiding for Personal Reasons

There can also be personal reasons that a will-writer might choose to give a gift before their death. In the case of a family emergency or unexpected circumstance, it can be extremely helpful to receive an inheritance as soon as possible. As a will-writer, you might recognize that you won’t necessarily need the excess money and it can make more sense in some scenarios to simply give a gift of cash, to help out. While it might seem unfair to do this, the other beneficiaries of your will can receive a higher percentage of the estate to make sure everyone is still receiving a fair share of the estate. There are various different work-arounds to ensure fairness amongst beneficiaries.

In the end, whether you give gifts before your death or name the inheritance in your will, those you wish to benefit from estate do so. The difference is that gift giving before death can avoid additional probate fees and provide sentimental value to you and your loved ones. Before naming any gifts, you should always be certain that you will keep enough to provide for the remainder of your own life.

Things to Consider Before Gifting

Unfortunately, gifting is a common reason for litigation in estate law, so will writers must be careful and clear about their intentions when distributing assets during their lifetime. It is important that will writers considering gifting significant portions of their estate during their lifetime are clear on their intentions for the asset transfer. The transfer of gifts should be recorded in a way that will make it clear that you did not intend for the receiver of the gift to hold the asset on resulting trust in order to minimize the risk of estate litigation after your passing.

If you need help estate planning, contact an experienced estate lawyer today. We will work with you closely to create the perfect estate plan for your situation, maximizing your estate’s value and convenience for your loved ones during an otherwise challenging period.

Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.