The Lasting Impact of Financial Gifts Within Families

The act of gifting money within families has always been a means of providing support and establishing a lasting legacy for loved ones. It serves as a way to offer younger family members a step forward in life or to commemorate significant milestones such as the purchase of a first home. While gifting money may appear similar to inheritances due to the transfer of assets within a family, there are notable distinctions that require careful consideration and understanding from both the giver and the recipient.

In contrast to an inheritance, which is typically received after the passing of a loved one, a monetary gift is a proactive and voluntary gesture made during the giver’s lifetime. Just as one must be considerate and responsible with an inheritance, both givers and recipients need to ponder the implications and plan accordingly when it comes to monetary gifts.

Determining the appropriateness of giving a financial gift involves assessing the unique circumstances of the giver and the recipient. Firstly, it is crucial to consider the financial situation of the giver. Is the gift coming from a place of financial stability, or could it impact the giver’s own financial plans or well-being? Additionally, are there any debts to take into account? The objective is for a financial gift to offer support without placing strain on the giver’s own finances.

In contrast to inheritances with specific instructions or stipulations, monetary gifts during the giver’s lifetime do not typically come with any terms or conditions. It is important to regard these gifts as what they are – no-strings-attached gestures of generosity. However, there are still ways for givers to direct their gifts for specific purposes, such as paying medical bills or contributing to a college savings account.

Understanding the technical aspects of gifting money or assets is essential for tax purposes and overall financial planning. For instance, the Internal Revenue Service permits individuals to gift up to £17,000 to another person without having to report the transaction. There are various methods for gifting, whether it is through cash, stocks, or contributing to education expenses through a 529 college savings plan.

Ultimately, financial gifting is more than just a financial transaction – it is an act of generosity that can have a lasting impact for generations to come. It serves as a means to establish a meaningful legacy and support the well-being of family members. With careful planning and consideration, financial gifts can strengthen family bonds and provide valuable support for the future.

Hunter Yarbrough, a vice president and financial adviser with CapWealth, emphasises the importance of taking a holistic view of personal finance. He is knowledgeable and passionate about various aspects of personal finance including investments, taxes, retirement, education, estate planning, and insurance. For more information about Hunter and CapWealth, please visit capwealthgroup.com.