When To Give Inheritance Money To Your Kids
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When To Give Inheritance Money To Your Kids

Is it better to help your children when you’re still alive? Or wait until after you die?

By Cheryl Winokur Munk
Mon, May 3, 2021 10:22amGrey Clock 5 min

Should an inheritance be strictly an inheritance, to be left to children when their parents die? Or should parents use at least some of that money while they’re still alive to help out their adult children financially? And if parents give while they’re alive, how much should they give and when?

Of course, every family is different—both in terms of what they can afford and what brings them joy. But there are some things every family should consider when deciding how to pass wealth from one generation to the next. The Wall Street Journal invited three financial advisers to discuss those issues: Michael Garry, founder of Yardley Wealth Management in Yardley, Pa.; Jacqueline B. Roessler, certified divorce financial analyst at the Center for Financial Planning in Southfield, Mich.; and Tony Walker, a retirement-planning specialist in Louisville, Ky.

Here are edited excerpts of the discussion.

WSJ: How do you advise clients on the topic of the timing of inheritance?

MR. GARRY: I believe strongly that parents should dole out money while they are alive and not stockpile it any more than they need to for their own financial security. The people who make gifts during their lifetimes are able to help their children, and maybe grandchildren, at the exact time they likely most need the money, and not based on the random date of their death. They also get to see the benefit of the gift to their children and grandchildren. The extent of the gifts depends on how much the parents can afford.

MS. ROESSLER: It depends on their personal goals, tax situation and current financial needs, as well as the financial needs and tax situation of their heirs. First, they need to make sure they have enough resources to cover their own financial needs, including any potential long-term-care expense. Once that’s established, they should discuss gifting strategies with their adviser, keeping in mind the parents’ ultimate goals, such as minimising income taxes and capital-gains taxes during their lifetime, spending down their assets to later qualify for Medicaid, or providing for their children’s specific financial needs.

MR. WALKER: I’m a firm believer that too many people save every penny until the day they die, instead of spending their money now. With so many savers maxing out contributions to their 401(k) plans, my concern is that most of them have no plan for using and enjoying their savings before it’s too late. There’s a struggle going on with my clients when I broach this subject of saving too much for the future. They wonder: Will their children be responsible with the money? There’s only one way to find out, and that’s throw them a bone now to see how they handle it.

WSJ: With the pandemic wreaking havoc on many families’ finances, have you seen families change the way they are thinking about inheritance?

MR. GARRY: Most of my clients are in much better shape than they were a year ago. Unfortunately, a lot of their children and grandchildren are not. We’ve seen a real uptick in people expressing gratitude in being so fortunate with their health and finances and not wanting to wait to help both their offspring and their favourite charities.

We’ve had people who have kicked the idea around for years but never did it who are actually taking steps now and making gifts. They seem to realize more than ever that they don’t know how much time they have, and some of their kids have been unemployed for much of the last year. I don’t think many of them ever expected to see their children hurting so much, and it has moved them.

MS. ROESSLER: I haven’t seen families make dramatic changes to their legacy planning, at least not yet. However, as government aid ends, many millennials will be left without jobs and with increased expenses. In conversations with older clients, they are prepared to begin making adjustments in their gifting strategy to accommodate changing needs.

WSJ: Should there be strings attracted to parental giving?

MR. WALKER: This is a gift and shouldn’t come with any strings attached. Still, how your kids and grandkids react might certainly sway future considerations as to whether you wish to continue the gift-giving trend.

MS. ROESSLER: I think it depends on the family circumstances. Some parents may feel their children need guidance on how to wisely spend gifted dollars; others aren’t comfortable attaching any strings to gifts. One family I’ve worked with requires their adult children to donate a portion of their annual gift to a worthy charity. Another family specified that the gift must be used toward college costs for their children or major expenses such as a car or down payment on a home.

WSJ: How can parents who want to help their children while they are alive prevent themselves from becoming their children’s bank?

MR. WALKER: Before starting the gift-giving trend, it is important for parents to speak about their finances frankly with their children. While you don’t have to take all of your financial clothes off, you need to be frank with them as to how you’re doing financially. As well, blend into the mix that you are very grateful for the way you have been blessed and your desire to share some of your good fortune with them now—at a time in life when they can use it—versus waiting until after you die. Also, never tell them that there’s more where that came from, as you might regret setting up such an expectation.

MR. GARRY: It makes it much easier to avoid being the bank if the child knows that the gift is for a specific purpose, like to pay their health insurance, or go toward their student loans, or make their IRA contribution or for a deposit on a property. I’ve also told my clients they can feel free to tell their children their financial adviser has said they can’t afford to make that gift or even make any more gifts, depending on the circumstances.

WSJ: What are some common mistakes you see parents making in deciding how to transfer wealth to their children?

MR. WALKER: Not understanding that the value of their 401(k) actually will go down over time. That is because between future taxes and inflation, the money they are stockpiling will be worth less then than it is now. Think about it: What if, instead of socking it all in a 401(k), you could give some money away to your kids now with no tax to them? Wouldn’t that make more sense?

MS. ROESSLER: Some parents give more than they can afford and wind up with an unintentional reduced standard of living. This can lead to marital tension when both spouses aren’t on the same page. There is also a substantial tax advantage to transferring stocks and mutual funds after death versus during your lifetime, though this could change under President Biden.

MR. GARRY: The biggest downsides come when gifts are given with no discussions around expectations. We had a client who, before coming to us, went through a bit of a rough patch with his son and daughter-in-law. He had made gifts for a few years to them around Christmas and he didn’t say anything about it other than “Merry Christmas!” Well, after three or four years of those gifts, the son and daughter-in-law expected them to continue. Without saying anything, he just stopped because he wasn’t in the financial position to continue. But they didn’t understand that and there was tension until they finally talked about why he had discontinued giving and they were able to heal the rift.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: April 30, 2021.



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New York Watch Auctions Record Uptick in Sales in the Face of Market Slowdown
By LAURIE KAHLE
Mon, Jun 24, 2024 4 min

Luxury watch collectors showed ongoing strong demand for Patek Philippe, growing interest in modern watches and a preference for larger case sizes and leather straps at the June watch sales in New York, according to an analysis of the major auctions.

Independent and neo-vintage categories, meanwhile, experienced declines in total sales and average prices, said the report from  EveryWatch, a global online platform for watch information. Overall, the New York auctions achieved total sales of US$52.27 million, a 9.87% increase from the previous year, on the sale of 470 lots, reflecting a 37% increase in volume. Unsold rates ticked down a few points to 5.31%, according to the platform’s analysis.

EveryWatch gathered data from official auction results for sales held in New York from June 5 to 10 at Christie’s, Phillips, and Sotheby’s. Limited to watch sales exclusively, each auction’s data was reviewed and compiled for several categories, including total lots, sales and sold rates, highest prices achieved, performance against estimates, sales trends in case materials and sizes as well as dial colors, and more. The resulting analysis provides a detailed overview of market trends and performance.

The Charles Frodsham Pocket watch sold at Phillips for $433,400.

“We still see a strong thirst for rare, interesting, and exceptional watches, modern and vintage alike, despite a little slow down in the market overall,” says Paul Altieri, founder and CEO of the California-based pre-owned online watch dealer BobsWatches.com, in an email. “The results show that there is still a lot of money floating around out there in the economy looking for quality assets.”

Patek Philippe came out on top with more than US$17.68 million on the sale of 122 lots. It also claimed the top lot: Sylvester Stallone’s Patek Philippe GrandMaster Chime 6300G-010, still in the sealed factory packaging, which sold at Sotheby’s for US$5.4 million, much to the dismay of the brand’s president, Thierry Stern . The London-based industry news website WatchPro estimates the flip made the actor as much as US$2 million in just a few years.

At Christie’s, the top lot was a Richard Mille Limited Edition RM56-02 AO Tourbillon Sapphire
Richard Mille

“As we have seen before and again in the recent Sotheby’s sale, provenance can really drive prices higher than market value with regards to the Sylvester Stallone Panerai watches and his standard Patek Philippe Nautilus 5711/1a offered,” Altieri says.

Patek Philippe claimed half of the top 10 lots, while Rolex and Richard Mille claimed two each, and Philippe Dufour claimed the No. 3 slot with a 1999 Duality, which sold at Phillips for about US$2.1 million.

“In-line with EveryWatch’s observation of the market’s strong preference for strap watches, the top lot of our auction was a Philippe Dufour Duality,” says Paul Boutros, Phillips’ deputy chairman and head of watches, Americas, in an email. “The only known example with two dials and hand sets, and presented on a leather strap, it achieved a result of over US$2 million—well above its high estimate of US$1.6 million.”

In all, four watches surpassed the US$1 million mark, down from seven in 2023. At Christie’s, the top lot was a Richard Mille Limited Edition RM56-02 AO Tourbillon Sapphire, the most expensive watch sold at Christie’s in New York. That sale also saw a Richard Mille Limited Edition RM52-01 CA-FQ Tourbillon Skull Model go for US$1.26 million to an online buyer.

Rolex expert Altieri was surprised one of the brand’s timepieces did not crack the US$1 million threshold but notes that a rare Rolex Daytona 6239 in yellow gold with a “Paul Newman John Player Special” dial came close at US$952,500 in the Phillips sale.

The Crown did rank second in terms of brand clout, achieving sales of US$8.95 million with 110 lots. However, both Patek Philippe and Rolex experienced a sales decline by 8.55% and 2.46%, respectively. The independent brand Richard Mille, with US$6.71 million in sales, marked a 912% increase from the previous year with 15 lots, up from 5 lots in 2023.

The results underscored recent reports of prices falling on the secondary market for specific coveted models from Rolex, Patek Philippe, and Audemars Piguet. The summary points out that five top models produced high sales but with a fall in average prices.

The Rolex Daytona topped the list with 42 appearances, averaging US$132,053, a 41% average price decrease. Patek Philippe’s Nautilus, with two of the top five watches, made 26 appearances with an average price of US$111,198, a 26% average price decrease. Patek Philippe’s Perpetual Calendar followed with 23 appearances and a US$231,877 average price, signifying a fall of 43%, and Audemars Piguet’s Royal Oak had 22 appearances and an average price of US$105,673, a 10% decrease. The Rolex Day Date is the only watch in the top five that tracks an increase in average price, which at US$72,459 clocked a 92% increase over last year.

In terms of categories, modern watches (2005 and newer) led the market with US$30 million in total sales from 226 lots, representing a 53.54% increase in sales and a 3.78% increase in average sales price over 2023. Vintage watches (pre-1985) logged a modest 6.22% increase in total sales and an 89.89% increase in total lots to 169.

However, the average price was down across vintage, independent, and neo-vintage (1990-2005) watches. Independent brands saw sales fall 24.10% to US$8.47 million and average prices falling 42.17%, while neo-vintage watches experienced the largest decline in sales and lots, with total sales falling 44.7% to US$8.25 million, and average sales price falling 35.73% to US$111,000.

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