Inheritance isn’t the only form of wealth transfer that an estate plan should take into account. Whether it’s cash, real estate, company shares, or heirlooms, any kind of asset can potentially be gifted between family members. How exactly you do it will make all the difference in its value.
Timing Is Everything
One key factor affecting the value and practicality of a family gift is when you give it. An increasing number of parents and grandparents are opting to transfer assets during their lifetime, which is why understanding the ins and outs of gifts is so important. This avoids probate expenses on those assets and it can be emotionally rewarding to gift an asset to a loved one before death. Simultaneously, however, it may not always be best to offer a gift sooner rather than later. The recipient may not yet be financially responsible, the right age, or willing to manage or maintain property. It’s just as important to examine these personal factors as it is to consider taxation.
The Tax Factor
Another particularly important consideration to bear in mind when planning to gift assets to family members is the potential tax outcome. In some cases, immediate tax impact will not be a concern, such as when gifting cash to family in Canada or when gifting assets to your spouse. However, when gifting capital or personal use property to relatives other than your spouse your gift may trigger capital gains tax. Both the immediate and long-term tax liability resulting from this will depend on a wide range of variables, but your estate planners can help you explore the best options for your circumstances.
Gifting will call for different strategies determined by the nature of the asset, the recipient, and more. The process of gifting emotionally significant heirlooms, for instance, can potentially be fraught with tension or even conflict without clear and open communication. Want to reduce the tax burden of gifting a family cottage? Some may be able to declare the house as their primary residence when gifting, thereby minimizing capital gains tax liability. Other income-producing assets such as investments, meanwhile, will require particular attention to detail if you want to gift them efficiently. Before giving, ask your family office to help you do it in the right way!Do you have the right family office by your side? From planning a will or trust to navigating the complexities of tax law, MacMillan Estate Planning offers a comprehensive range of services for the affluent family. Get in touch with us today and we’ll be happy to schedule a free consultation.