Set up a trust
One of the easiest ways to shield your assets is to pass them to your child through a trust. The trust can be created today if you want to give money to your child now, or it can be created in your will and go into effect after you are gone.
The best method for parents to structure a wealth transfer to protect their child's inheritance is via a trust. One efective way to shield your family's wealth — whether from things like divorce or from anyone who may try to take advantage of them — is through a trust with a corporate trustee to oversee it.
Double Your Gift With Gift Splitting
So, say that you're married. You can give your son and his wife up to $18,000 each in 2024 under the annual exclusion. Your spouse could also give your son and his wife up to $18,000 each under her own annual exclusion, for a combined gift of $72,000 from one household to the other.
If you are the designated beneficiary on a deceased person's bank account, you typically can go to the bank immediately following their death to claim the asset. In general, there is no waiting period for beneficiaries to access the money; however, keep in mind that laws can vary by state and by bank.
What is a non-spouse beneficiary of an inherited IRA? If you were any of the following to the original owner of the IRA you inherited, you are a non-spouse beneficiary: Child of the original owner. Grandchild of the original owner. Sibling or other relative of the original owner.
For liquid assets, like cash, distributions to beneficiaries can be effectuated by either wiring funds to a bank account in the beneficiary's name or issuing a check to the beneficiary.
In these circumstances, a trust can help set up specific management plans for your assets, provide tax benefits and give your beneficiaries time to adjust to having assets held for them. If you have a straightforward estate and mature adult children, leaving assets outright to them might be appropriate.
From this perspective, if you are inclined to give, you should gift as much as you can comfortably afford during your lifetime, while remaining aware of the available step-up in capital gain basis for inherited assets. So, gift your assets that have minimal gains and save your most appreciated assets for inheritance.
Bottom Line. California doesn't enforce a gift tax, but you may owe a federal one. However, you can give up to $19,000 in cash or property during the 2025 tax year and up to $18,000 in the 2024 tax year without triggering a gift tax return.
In most states, it is impossible to totally disinherit your spouse in a will. Spouses have a right of election, and can claim a certain fraction of the estate as their elective share, no matter what the will says. In community property states, a surviving spouse owns half of their shared property.
Prenuptial and Postnuptial Agreements are the strongest way to protect your separate property from your spouse. Your separate estate and any potential inheritance, or gift, can be clearly defined in an agreement along with rights and responsibilities of both spouses in the event of a divorce.
One good way is to leave the inheritance in a trust. The trust can be set up with some provisions, such as making distributions over time. A trust can also remove the issue of probate, allowing the inheritance to pass without issue.
While your spouse is free to leave, removal of your children against your will is a violation of your right as a parent – as well as a violation of your children's right to have access to you.
It's not illegal to take money from your kids in most cases, although, of course, there are exceptions, like if the child's money is in a specific trust and you abuse the funds.
It is important to note that capital assets given during life take on the tax basis of the previous owner, when these assets are given after death, the assets are assessed at current market value. This may cause loved ones to miss out on tax benefits, such as a step-up in basis after your death.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income.
You can create a trust during your lifetime or through your will and name your child as the beneficiary. You can also appoint a trustee who will be responsible for distributing the trust income and principal according to your instructions.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
May I deduct gifts on my income tax return? Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
Many different types of assets can result in tax liability when inherited from a loved one. However, there are a handful of assets that are the most likely culprits. Stocks and cash: Inherited cash generally isn't taxable unless the estate exceeds the applicable estate or inheritance taxes.
A good place to deposit a large cash inheritance, at least for the short term, would be a federally insured bank or credit union. Your money won't earn much in the way of interest, but as long as you stay under the legal limits, it will be safe until you decide what to do with it.