Drawbacks of Outright Gifts

The most obvious difficulty with outright gifts is the total loss of ownership and control of the gifted property. In our years of legal practice, we have rarely encountered instances in which parents are willing to transfer complete control over large sums of money to their children. Despite considerable estate and income tax savings, few people are willing to give up a portion of their wealth, which they have worked hard to accumulate during their lifetime.

Even when their wealth is beyond what they reasonably need to live comfortably, parents are concerned about the wisdom of making outright gifts to their children. Sometimes there is an issue concerning the child’s marital status and what will happen to the gifted property in the event the child is divorced. Sometimes there are concerns about the child’s level of financial responsibility and whether the funds will be squandered. Many times the parents are concerned about the creditors of a child reaching the property. When the situation involves minor children or grandchildren, who are not legally capable of holding title to property, there are questions about who will act on the child’s behalf in holding the property and when the property should be distributed to the child. These are all matters of great consequence and must be carefully considered by parents contemplating this type of gift giving program.