Now or Later?

MOST OF US ARE ill-prepared for retirement, so we should be modest with our gifts to family and to charity during our lifetime. Instead, we might focus on how we’ll disburse our wealth after our death. Our kids and other family members won’t appreciate it if we give them a big hunk of our wealth today—and then ask for it back a decade later, when we’re impoverished retirees.

What if you have done a fine job of saving for retirement and other goals, and you can afford to give away money now, rather than waiting until after your death? There are good arguments for giving away part of your wealth during your lifetime.

If you give money to family members while you’re alive, you will get to share in their delight, and you might help them enjoy the sense of financial security you have achieved. In addition, you will get money out of your estate, including the future investment growth. That might reduce the potential bite from both federal estate taxes (though this won’t be an issue for the vast majority of Americans) and your state’s estate tax (which can be a big issue in some states).

Similarly, if you give to charity now, you will have the pleasure of knowing you are doing some immediate good. Whether you give money to charity now or at death, you will shrink your taxable estate. But by giving during your lifetime, you could also cut your federal income tax bill, assuming you itemize your deductions. By contrast, if you make a bequest upon death, there are no income tax savings.

Next: Estate Planning

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