The Benefits of Before Death Distribution of Inheritance

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on September 06, 2023

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What Is an Inheritance?

An inheritance is a sum of money or property that is passed down from one family member to another after someone dies.

Usually, an inheritance is given to the deceased person's spouse, children, or parents.

However, there are other ways to distribute an inheritance, such as through a will.

Why Should You Give Your Inheritance Before Death?

There are a number of reasons why you might want to give away your inheritance before you die.

Here are just a few:

  • You may not have an immediate need for the money. For example, instead of spending down what would be left in a shorter amount of time, you might want to leave the money to your loved ones.
  • You may be concerned with how those close to you will feel if they find out about the inheritance. To avoid any hurt feelings, you might want to give away the inheritance as a surprise.
  • You may be getting taxed on receiving more than one million dollars, so you want to give away some of your inheritance before it reaches that amount.

People have a lot of different reasons for giving their inheritances before death, and many people who do so feel very good about what they have done.

When Might Someone Not Want to Give Their Inheritance Before Death?

An inheritance is usually meant to ensure that loved ones are taken care of.

There are some cases where people who receive an inheritance might not want to give it away before death.

The reasons are as follows:

  • The inheritance may be needed to take care of bills or other financial obligations.
  • The inheritance might be used to pay for the costs associated with a funeral or estate administration.
  • The inheritance might be set aside as a safety net for loved ones in case something happens to them down the road.

However, there are many cases where people do not have a need for an inheritance, and it is given to those they care about as a form of legacy.

The Benefits of Giving Your Inheritance Before Death

There are many benefits to giving your inheritance before you die. Here are some:

  • You can give money or property that you own as an inheritance any time you want. You can give it to your family now, and you don't have to wait until after you die to do so.
  • You can decide what happens with the inheritance: If someone will receive it, how much they'll get, and when they'll get it.
  • People who never expected an inheritance from a relative might be pleasantly surprised. This is especially true when the deceased person never said anything about their plans to give an inheritance away before death.
  • If your loved ones are not expecting an inheritance from you, they will typically spend that money more quickly.

    This can be a good thing in some cases since it means that there is less money in a family member's estate that will have to be taxed after death.
  • Giving an inheritance before death can help reduce the burden on the loved ones of the deceased.

    This is because they will not have to worry about selling property, taking out loans, or going into debt to pay for funeral costs or estate administration.

How to Give Your Inheritance Before Death?

There are a few different ways to give away an inheritance before death.

One way is to simply give the money or property away to the people you want to receive it.

You can also establish a trust, which is a legal document that dictates how and when the money or property will be distributed.

Another way is to sign a beneficiary designation form.

With this document, you can give your life insurance beneficiaries or retirement accounts to the people you want to receive them.

For some inheritances, it makes sense to create a special type of trust that helps bypass probate and ensures that the inheritance goes where you want it as quickly as possible after your death.

How Do I Give Money or Property as an Inheritance?

You can put money or property into joint accounts with other people.

This makes it easy to give the inheritance to the right people after you die.

Additionally, this allows them access to that money or property while you are still alive.

If it is something that is needed for daily living expenses, you might consider living trusts so your estate can be passed on without going through probate after you die.

A third way is to create a will that includes provisions for your inheritance.

There are also some steps you can take to make it easy for your executor and heirs to know what assets you have and where they are located so there won't be any problems.

How Do I Give Stocks and Bonds as an Inheritance?

Stocks and bonds make great inheritances for people they can be turned into cash easily through a brokerage account.

This makes it easy to transfer the stock or bond to someone else, whether you decide to directly transfer it or create a trust that holds the stock or bond.

When you give stocks and bonds as an inheritance, it is important to make sure that the person who receives them understands how the stock or bond works.

The Bottom Line

There are many reasons why people choose to give their inheritances away before death.

Some do it out of a sense of generosity, while others do it in order to ease the burden on their loved ones.

Whatever the reason, giving an inheritance before death can be a good thing for everyone involved.

When thinking about whether or not to give an inheritance before death, keep in mind that it can affect your family's financial future.

If you want to give money or property as an inheritance, determine if the person who will receive it really needs it and knows how to use it responsibly.

If you want to give stocks and bonds as inheritances, make sure that the people receiving them understand how they work.

You may also want to consider creating a special trust that helps the inheritance go where you want it as quickly as possible after your death.

Whatever route you choose, make sure to talk to an estate planning lawyer to get help with the legal details.

Distribution of Inheritance Before Death FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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