Most parents want what’s best for their children. They work hard to raise their kids properly and position them to reap the benefits of their wealth after they’re gone.
But here at Deerfield Financial Advisors, we believe that transferring wealth to your loved ones should be focused on what’s meaningful in your life now—not after you’re gone. We help our clients create a wealth transfer plan so they can witness the fruits of their labor while they’re still here.
Outlined below are some of the wealth transfer vehicles we recommend to our clients to align their giving with their most treasured values.
Gift Your Assets
Lifetime gifting lets you transfer wealth to your loved ones before you pass away. It’s a smart way to reduce estate taxes, provide financial help to family members, and align your asset(s) distribution with your wishes. In 2023, you can give up to $17,000 per person, per year. If you’re splitting the gift with a spouse, you can give up to $34,000. So that means a married couple with two kids can give $34,000 to each child for a total of $68,000 without filing a gift tax return.
If you gift your loved ones assets while you’re still alive, you get to see the results of your generosity during your lifetime. For example, let’s say you gift $15,000 to your grown daughter who needs a new roof on her house. By giving her money now instead of after you’re gone, not only will you reduce your tax bill, but you’ll also get to see the result of your kindness every time you visit your daughter’s home.
Invest in a 529 Plan
Here’s another tax-advantaged way to transfer your wealth to your loved ones and simultaneously contribute to their well-being.
Simply put, a 529 plan lets you save money to pay for a college education. 529 plans offer a variety of benefits, including tax-free growth, tax-free withdrawals, flexible investment options, easy setup, and state tax benefits. There is a special provision that allows donors to contribute 5 years’ worth of gifts as a lump sum. This means an individual can gift up to $85,000 ($17,000 x 5) and a married couple can gift up to $170,000 without incurring gift taxes! The beneficiary can then withdraw the funds and investment growth tax-free to pay for qualified education expenses.
The individual who initiated the 529 plan (referred to as the plan owner) has the option to alter the beneficiary—and without incurring any penalties—provided that the new beneficiary qualifies as an “eligible family member.” Addressing concerns among families regarding the potential confinement of funds within a 529 plan due to limited beneficiary change options, SECURE 2.0 introduces a provision (starting in 2024), under which 529 plan beneficiaries can transfer unused funds directly to a Roth IRA without facing penalties or triggering taxable income recognition.
The most worthwhile benefit? Witnessing your loved one pursue a higher education that leads to a successful career in their field, perhaps as a lawyer, small business owner, or engineer.
Fund a Family Vacation
Taking your whole family on a trip you’ve always dreamed about is a great way to collectively enjoy the fruits of your lifelong labor.
Think about it. You could spend quality time together as a family planning your getaway before the departure date even arrives. Then the trip itself lets you savor sweet vacation memories of your kids and grandkids. Similarly, they could spend precious time getting to know the real you, away from the grind of daily life. After the trip, you could share photos, laughter, and recipes from your experience.
Sharing wealth is supposed to be enjoyable. Make it happen!
Create an Irrevocable Trust
If you’re worried about how gifted or inherited funds will be used by your kids, setting up an irrevocable trust is a smart option. It enables you to both reduce estate taxes and provide specific instructions for how you want your heirs to spend their inheritance.
Depending on how you structure the trust, you could potentially grant asset(s) incrementally to your heirs before you pass away. For example, if one of your heirs tends to squander money, you could set up monthly payments instead of giving them carte-blanche access to your assets.
Partner With a Professional to Give Your Kids the Best
Transferring wealth and seeing the results of your gesture is possible. With the help of qualified wealth management advice, you can both share your wealth and also support your children during your lifetime.
At Deerfield Financial Advisors, we’re here to help you create a legacy that’s more impactful than leaving a large inheritance when you’re gone. If you’re interested in partnering with a wealth manager to help you use your wealth to create more of what is worthwhile in your life, reach out today. To learn more about how to live your WealthwhileSM, call (317) 644-7701 or email mroop@t8j.01f.mywebsitetransfer.com.
About Matt
Matt Roop is Wealth Manager and Shareholder at Deerfield Financial Advisors, a fee-only financial services and wealth management firm with offices in Indianapolis and Chicago. In his role, Matt acts as a personal “chief financial officer” for his clients, overseeing every facet of their financial landscapes, orchestrating strategies to grow their wealth, and enhancing their financial clarity. Catering to the distinct needs of lawyers, engineers, and business owners, he empowers them to embrace their passions and lead their optimal lives. Matt conveys a depth of experience and a calm demeanor that clients find reassuring and soothing, and he loves providing peace and confidence around their financial future.
Matt received a Bachelor of Science from Indiana University and a Master of Business Administration (MBA) from George Washington University. He is a NAPFA Registered Financial Advisor and holds the CERTIFIED FINANCIAL PLANNER™ and Certified Exit Planning Advisor (CEPA) designations. Committed to staying at the forefront of his field, he is actively involved with the Exit Planning Institute, National Association of Personal Financial Advisors, and the Estate Planning Council of Indianapolis. Since 1997, Matt has been involved in the investment and wealth management realm, with experience at Charles Schwab & Co., Inc., as well as a boutique Indianapolis-based independent advisory firm and a brief stint at his family’s closely held business.
Outside the professional realm, Matt serves his Indianapolis community by volunteering for Meals on Wheels of Hamilton County and is on the Executive Leadership Team for the Indiana Alzheimer’s Association’s Walk to End Alzheimer’s. He is dedicated to financial stewardship and continuous growth, with an unyielding commitment to enhancing the lives of both his clients and his community. Matt and his wife, Kimberly, reside in Carmel, IN, with their four children, who are all pursuing their college dreams. When he’s not working, he enjoys traveling, reading, and spending time at his lake house in southern Indiana with family. To learn more about Matt, connect with him on LinkedIn.
