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Giving especially generous monetary gifts over the holidays can be helpful to the giver as well as the receiver, particularly when it comes to taxes. By giving large monetary gifts, the giver may avoid paying taxes on a block of stock or reduce a future high estate tax bill.
Profitable though it may be, emotionally and financially, to reward your children and grandchildren while you’re all together to enjoy the process, there are often inherent dangers in the giving of large gifts. In many cases, the receipt of a large amount of money can be a corruptive force. If an immature person suddenly has a small fortune in his or her hands, it may result in a foolish, frivolous, or even hazardous expenditure. Young people, unprepared to invest wisely, may buy a very expensive piece of unnecessary equipment, or may even use the money to buy drugs.
Because of the hazards mentioned, many givers want to maintain some control over how their money will be used. There are several ways to protect both the recipient and the money.
These include:
In giving sizable gifts, it is important to be aware that:
In all matters of inheritance and tax, especially when you’re dealing with a large estate, it is essential to engage the services of a knowledgeable, experienced estate planning attorney.