Your mother's engagement ring. Your extra car. Your workshop full of pricy woodworking tools that you don't use anymore. You may have a list, or just an idea, of which of your kids and grandkids you'd like to leave these valuable items to after you pass away. And you probably want to avoid the common problem of family members fighting over inheritances.
Even the most mild-mannered people, perhaps fueled by their grief, can behave irrationally or get greedy when it comes to inheritances. You don't want your family to end up fighting in court, battling over that ring, car and drill, fracturing the family and wasting money on legal fees. And you certainly don't want them angry with you after you're gone, feeling that you've favored one child over another.
Some seniors are anxious enough about the inheritance of their belongings to create a plan in advance, gifting their kids and grandkids with a number of items so that their offspring can enjoy them now, and so the seniors can see their kids and grandkids enjoying those beloved items. "I'd love to see my granddaughter wear my mother's engagement ring," says retiree Anne Daniels. "What good is it doing in my safe?"
The joy of seeing kids and grandkids wearing and enjoying jewelry can make it totally worth the decision to give them the items they otherwise would've received via a letter, after you're gone, when they are sad. "I wouldn't want that ring to be a symbol of sadness for my granddaughter," says Daniels.
Many grandparents enjoy the great family moment of giving a grandchild the keys to their extra car, or giving their kids their RV for a cross-country trip.
And then, of course, there's the financial end of a luxury gift item. The car or RV could be sold by your kids to help finance the start of a business, to put a down payment on a home in a safer community or to help pay for your grandchild's college tuition.
Before you start making calls to your kids and grandkids to offer them your possessions, talk to your accountant and tax advisers. While you may resent Uncle Sam's place in line for the value of your belongings, there are strict tax rules about gifts given to relatives. Ask your tax adviser for the current value limit on tax-free gifts that you can give, so that you always stay within the letter of the law.
Tax values of pre-inheritance gifts are different from inheritance taxes and estate taxes, which are configured after your death. These are tax values applied to personal gifts, and you will need professional tax advice to assess and document each of these gifts before you bestow them.
Tax issues aside, think about your kids' and grandkids' connections to the items you'd like to leave them to help you decide who gets what. If your daughter was especially close to your mother, she may be the most logical choice to inherit your mother's engagement ring. Have it professionally assessed for its value, and record that value in your daughter's "column" on your gift records. Your son, then, may get a gift or gifts of equal financial value, if that is how you'd like to divide your presents.
Once you've decided who gets which pre-inheritance gift, and once the values are recorded and assessed by your tax professionals for your safety, you may enjoy planning the presentation of these gifts to your loved ones.
Will you put a big red bow on the car? Give your daughter the ring in your mother's jewelry box? Before you decide on the presentation, consider that your kids and grandkids may be taken aback by the delivery. It is, after all, difficult for them to even think about the day when you're no longer alive, and they might see your gift presentations as a sign that you're gravely ill -- or perhaps depressed.
To avoid shocking them, discuss with them ahead of time that you've been thinking about giving them some of your precious possessions so that you can enjoy witnessing them enjoying these items. Expect some questions and concern, but once you assure them you're feeling just fine, you all can look forward to your gestures of generosity. Maybe you'll give out these items as holiday presents.
Once your gifts are given, it's a good time to talk with your children about your wishes for after your death, how you'd like them to handle your estate and how you'd like them to let you know which other items they feel strongly about. "Once they got comfortable with this macabre conversation," says retiree George McArdle, "we actually had fun talking about and recording who would like to inherit what, and my sons surprised me by the things they considered most valuable to them. Like my fishing poles and crabbing gear, not my wristwatches."
If two of your kids express interest in, say, a painting, talk together to decide now who will inherit it, and put it in writing so that your loved ones don't wind up wasting their post-tax inheritance money hiring lawyers to get that $50 painting or those fishing poles.
Invite your kids to create their own personal estate plans, as well, so that their kids are protected in case of the worst. It's not fun talking about death, but clear communication now can help avoid clashes later.