A 73-year-old woman with enough money for retirement runs into a classic Boomer conundrum: Should she give her children money today or let them inherit it when she dies?

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It’s a thorny issue since America’s baby boomers have a whopping $78.55 trillion in household wealth, according to the Federal Reserve. Even when you factor in things like legal fees and inheritance taxes, it’s a lot of work when it comes to passing money on to heirs. At the same time, many members of the generation are standing

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When it comes to estate planning, considering when to give an inheritance to your children is as important as the dollar amount.

When is the right time for an inheritance?

Harding’s advice to his 73-year-old client was to think about life in 20 years, when she is 93. Her children will be in their 60s and her grandson will be 33 years old. By the time they inherit their money, “everyone has somewhat settled into who they are and what they will become,” he says.

“Now compare that to a gift today. Your children have reached a point in their lives where a financial gift can have a transformative effect. Consider the impact of missing out on a little financial stress for the parents of a 13-year-old.”

If your children are in financial trouble and will inherit your money at some point anyway, it may make sense to give it away (at least some of it) now. But everyone’s situation is different and each approach has advantages and disadvantages.

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Advantages and disadvantages of a living heritage

In your 30s and 40s, you tend to have more expenses: getting married, having a child, buying your first home, starting a business, and/or saving for your children’s college education—all while trying to set aside money for retirement place . Add to that the rising cost of living, and it’s a recipe for financial stress.

Processing your children’s inheritance quickly with a living legacy may make more sense when they are younger and need the money most. It also means you can see how your hard-earned money is being put to good use while you’re still alive, reducing the stress of estate planning for your loved ones after your death.

There could also be tax benefits: Taxpayers get a basic lifetime exemption of $13.61 million (as of 2024) and an annual gift tax exclusion of $18,000 (or $36,000 per couple). If you give away more than this amount, you will automatically have to file a gift tax return, which will count toward your lifetime exclusion. If your estate exceeds this exemption amount, it may be worth giving away the annual $18,000 now so that your heirs are not burdened with additional taxes after your death. However, as this is a complex undertaking, it is advisable to do so under the guidance of a legal, tax or financial advisor.

On the other hand, your heirs could spend their inheritance on something you didn’t plan for, which could lead to family drama. For example, let’s say they use it for a luxury vacation instead of a down payment on a house. If this is a problem, you can gift them money through an annuity, which means they receive regular guaranteed payments rather than a lump sum payment. Or you could use a trust, which gives you additional control over your money during your lifetime.

Advantages and disadvantages of an inheritance

Harding’s 73-year-old client could live well into her 20s – and she wants to make sure she doesn’t outlive her nest egg. Longevity is a legitimate concern. After all, you don’t want to write your children a big check when you retire and not be able to pay for unexpected medical treatments 20 years later. You want to set a budget for your retirement years and manage your nest egg wisely. A trusted advisor can help you with this.

Estate planning is also complex. Giving away your assets now could add even more complexity, especially if you have more than one child. Suppose one of your children is a homeowner and the other cannot afford a home. Should you give the child who otherwise wouldn’t be able to buy a house a down payment and give the other child a lump sum, or do you just make sure in your will that they get more? The answer is not always clear.

If you want to leave an early inheritance, you need to figure out how much you can give away now to keep your golden years golden.

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This article is for informational purposes only and should not be construed as advice. The provision is made without any guarantee.