TRUST & ESTATE PLANNING

Communicating with Beneficiaries: A Gift is More Than Dollars and Cents

09.23.2020 - Nita S. Vyas

Thoughtful Gifting in 2020 Part 4: This is the fourth piece in a four-part series on the federal gift and estate tax, what the future might hold for the exemption amount, and why you should consider making large gifts in 2020.

Thoughtful Gifting in 2020 Part 1
Thoughtful Gifting in 2020 Part 2
Thoughtful Gifting in 2020 Part 3

In our three previous pieces on the federal gift and estate tax exemption amount , we offered several  steps to consider if you’re thinking about making larger gifts for tax savings in 2020. First, determine if the potential tax savings of a decrease in the estate tax exemption may apply to you. Second, focus on the amount you’re prepared to gift. Finally, decide on the particular assets you want to give and the structure of the trusts or other vehicles you may use to complete your gifts.

While communicating with your beneficiaries is often an afterthought, it is also crucial. Try to see the gift through the eyes of the beneficiary and understand that his or her reaction can range anywhere from gratitude and joy to greed and distrust.  

Explaining the Purpose of Your Gift 

Thoughtful communication with your beneficiaries is essential when making larger gifts. If gifts are made in trust, the focus should be on the intended benefit of the trust and how the terms of the trust document help fulfill that intention.

Too often, donors and beneficiaries alike focus on the dollar amounts of gifts and fail to place appropriate emphasis on the long-term purpose of a gift. Consider what a difference it makes to describe your gift as something that will provide your descendants with a college education and a down payment on their homes for multiple generations, versus describing it as a gift of $23 million subject to restrictions and the trustee’s discretion. Both descriptions are technically accurate. But the first description conveys your intentions in a much more meaningful way. It also creates a better platform for an ongoing conversation with beneficiaries about the purpose of the family’s wealth.

Donors and beneficiaries also often make the mistake of not placing a gift in the larger scheme of the donor’s estate plan. If a gift is made without reference to the estate plan, beneficiaries are often left to wonder what else they might expect to receive and whether the way they handle a gift today might be a test to determine how they might receive assets down the line. Sometimes that may be true. Yet other times the lack of communication and big picture perspective can breed uncertainty and distrust that corrodes relationships.

As an alternative, consider starting the discussion by describing the broader estate plan. Tell your beneficiaries about your big picture goals and general scheme for what happens with your assets and decision-making. You can then use that stage to explain how the current gifts begin to fulfill your goals and capitalize on the tax savings opportunities that are currently available.

You don’t need to share all the details of your estate plan, but providing your beneficiaries with context gives them the chance to see themselves as both beneficiaries and partners in fulfilling the overall goals of your estate.

Keeping the Conversation Going

One important aspect of communicating with your beneficiaries about a gift is recognizing that the communication never stops. Checking in with your beneficiaries about the goals you’ve articulated for them reinforces the purpose of your gifts. Involving them in decisions about property in the trust or a review of your investments, when appropriate, gives them a sense of responsibility. Urging them to develop their own estate and tax plans lets them see their role in the ongoing stewardship of your gifts.

In addition, the way you live, how you oversee your family’s financial affairs, and how you interact with financial professionals can serve as a power of example for beneficiaries to follow.

We Can Help You Start

Many of the relationships Fiduciary Trust has with clients today were created when families used their gift and estate tax exemptions to create trusts for multiple generations of beneficiaries. Our experienced advisors can run the numbers to determine the potential tax benefit of using your federal gift and estate tax exemption. We also can review your personal balance sheet to identify assets to give, design trusts to receive gifts, and help you communicate effectively with family members. Our goal is to help you protect and grow your wealth for generations.

For details, please contact your Fiduciary Trust representative or call us at (877) 384-1111.

 


This communication is intended solely to provide general information. The information and opinions stated may change without notice. The information and opinions do not represent a complete analysis of every material fact. Statements of fact have been obtained from sources deemed reliable, but no representation is made as to their completeness or accuracy. The opinions expressed are not intended as individual investment, tax or estate planning advice or as a recommendation of any particular security, strategy or investment product. Please consult your personal advisor to determine whether this information may be appropriate for you. This information is provided solely for insight into our general management philosophy and process. Historical performance does not guarantee future results and results may differ over future time periods.

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