Transferring wealth can help you ensure your family is taken care of after you’re gone. However, some methods may leave them with unexpected fees come tax time. Financial advisors can help you find the most relevant strategies for gifting assets based on your specific situation, but here are some of the most popular options to consider.
How to Transfer Wealth to Loved Ones
A trust is an account that allows a third party to hold assets and then direct them to others when the time comes, which may be upon the grantor’s death or once the recipient reaches a certain age. There are several different types, including grantor-retained annuity trusts, which allow the grantor to retain some level of access. Speak with your financial advisor to determine which options are best for your specific situation.
2. Roth IRA Conversions
For those with assets in a traditional IRA, it may be worthwhile to convert to a Roth IRA to help family members when it comes to taxes. When you convert these assets, you pay income taxes on the amount, meaning your family doesn’t have to do so later. That money can grow over time and be taken out tax-free when needed.
3. Annual Gifts
Each year, the IRS sets a limit for how much you can give directly to a family member without them being taxed on that amount. In 2020, that limit is $15,000. If you have a significant amount to transfer, make payments each year that reach the maximum gift limit.
4. Payments for Services
If it’s not important for you to give money directly to loved ones, it may be more practical to simply pay for certain aspects of their lives directly. For example, many colleges allow payments to be made from family members, and your loved one should not be taxed on that amount since it’s never actually going to them.
If you’re looking for experienced financial advisors to help with these decisions, contact Seeman Holtz. Based in Boca Raton, FL, the company works with businesses and individuals around the country, providing solutions for risk management, financial planning, insurance, and payroll. The team provides individualized care and support to every client to ensure their unique needs are met. Visit the website or call (800) 991-3592 to request a consultation.