When planning the distribution of your assets, you may wonder whether to give property to your loved ones or let them inherit it through your estate plan.
Both approaches have advantages and disadvantages. However, a few considerations can help you make an informed decision.
Gifting property
Gifting property provides immediate benefits to your loved ones. It allows them to use, sell, or lease the asset without delay. Additionally, it reduces the size of your estate, potentially lowering estate taxes.
If your estate exceeds Delaware’s exemption limit, gifting property during your lifetime can be advantageous. Moreover, you can witness firsthand the joy and impact it has on your loved ones.
However, it comes with potential drawbacks. If your loved ones sell the gifted property, they could incur capital gains taxes based on its original purchase price, not its current value.
Additionally, once you transfer ownership, you lose control over the property. These factors underscore the importance of creating an estate plan before making property gifts.
Inheriting property
Inheriting property allows the property to receive a “step-up” based on its fair market value at the time of your death. It can potentially minimize or eliminate capital gains taxes upon its eventual sale. Retaining the property within your estate ensures that you maintain control over it.
However, inherited property often involves the probate process. It can be lengthy and involve legal expenses. Additionally, depending on the estate’s size, the property may also be subject to estate taxes. It could diminish the total value of the inheritance received by beneficiaries.
Ultimately, whether to give property or allow for future inheritance through your estate plan depends on your financial situation. However, being aware of your options ensures that you can make the best choice for you and your loved ones.