Gifting money, property, or other assets to family members, loved ones, and even charities is a wonderful way to share wealth and provide assistance. Making gifts while you are still alive is an excellent way to create memories rather than leaving everything to be distributed through an estate after death. Watching a grandchild complete college because you helped cover tuition or assisting an adult child in purchasing a first home can be deeply rewarding. You may, however, prefer to gift some assets after you are gone to ensure that people or causes are financially secure in your absence. While the emotional benefits of gifting are clear, the legal and financial consequences are not always straightforward, and missteps can lead to tax burdens, disputes among relatives, or even disqualification from government benefits. To help you avoid common pitfalls, the attorneys at Legacy Care Law Firm explain eight mistakes frequently made when incorporating gifts into a New Hampshire estate plan.
Misunderstanding the Role of Cost Basis and Capital Gains
One of the most easily overlooked issues arises when property or investments are transferred during life rather than after death. Assets carry a “basis,” which is typically the original purchase price plus any improvements. When you give away an asset while alive, the recipient takes over your basis. If they later sell the property, they could face a substantial capital gains tax bill. Imagine a New Hampshire resident who purchased lakefront land decades ago for $200,000 that is now valued at $2 million. If that property is gifted to a child, and the child sells it, they may owe taxes on the $1.2 million gain. By contrast, if the same property were inherited after the owner’s passing, the basis would be adjusted to the current fair market value, eliminating much of the tax liability. Misjudging the effect of cost basis can unintentionally place a heavy burden on your heirs.
Failing to Coordinate Beneficiary Designations with Estate Documents
A common misconception is that a Will or trust governs the transfer of every asset. In reality, certain accounts transfer automatically to the person listed on the beneficiary form. Life insurance, retirement accounts, and payable-on-death accounts are prime examples. If those designations are outdated, they may conflict with your estate planning documents. For example, you may revise your Will to divide your estate equally among all three children, but if a retirement account still names only your oldest child as beneficiary, that account will bypass the estate entirely. To prevent unequal distributions and family conflict, it is vital to periodically review and update designations, so they align with your larger estate plan.
Overlooking the Importance of Professional Guidance
Attempting to make large transfers without professional assistance can be a costly mistake. While modest gifts of cash are usually safe, conveying real property, valuable business interests, or investment accounts is far more complex. Errors in titling, missing paperwork, or failure to file necessary tax forms can create confusion and even litigation. An experienced New Hampshire estate planning attorney can ensure that your intentions are clearly documented and that state and federal laws are followed. Coordinating with both a legal professional and a financial advisor is essential before undertaking substantial gifts.
Making Gifts That Conflict with Estate Planning Goals
Another trap occurs when significant lifetime gifts are not integrated into the broader estate plan. For instance, giving a valuable asset such as a vacation cabin to one child while intending to divide the rest of the estate equally among all children can produce resentment and conflict. Siblings who feel disadvantaged may challenge the estate in court, causing delays and family rifts. To reduce the likelihood of disputes, gifts should be clearly documented and reflected in your Will or trust. Indicating whether the transfer is considered an “advancement” of inheritance or an additional benefit is important for clarity. Updating estate documents ensures that your overall plan reflects your intentions.
Misunderstanding the Federal Gift Tax Rules
Gift tax rules are often misunderstood. Each year, the Internal Revenue Service sets an “annual exclusion” amount that can be given to any number of individuals without filing a gift tax return. For 2025, the exclusion is $19,000 per recipient, and married couples can combine exclusions for a total of $38,000 per person. What surprises many people is that gifts above this amount do not necessarily create an immediate tax bill, but they must be reported on IRS Form 709. Failure to do so can result in penalties or complications for your estate later. Another frequent misunderstanding is assuming that gifts to close relatives such as children are automatically exempt from these rules, when in fact the exclusion applies regardless of who receives the gift.
Failing to Monitor the Lifetime Exemption
In addition to the annual exclusion, the federal government provides a lifetime exemption that shields substantial wealth from gift and estate taxes. For 2025, the exemption is $13.99 million per person, rising to $15 million in 2026. Exceeding that threshold can expose future transfers to taxation. Many individuals do not realize that gifts above the annual exclusion chip away at the lifetime exemption, even if no immediate taxes are owed. Without careful recordkeeping, these cumulative gifts may unintentionally use up the exemption, leaving your estate vulnerable to taxation later. Tracking every significant gift is essential to ensure compliance and avoid surprises.
Ignoring the Impact on Long-Term Care Planning
Asset transfers can have significant consequences for Medicaid eligibility, a critical factor for those who may one day require nursing home care. In New Hampshire, Medicaid applies a five-year “lookback period” to identify gifts or transfers made for less than fair market value. Any such transfers within that period can result in a penalty during which you are ineligible for coverage. Even modest gifts to children or grandchildren may trigger a waiting period. With annual nursing home costs in New Hampshire often exceeding $150,000, this could mean depleting your savings before benefits are available. Careful Medicaid planning, often involving irrevocable trusts or other protective strategies, should be considered before transferring assets.
Assuming All Beneficiaries Are Equipped to Handle Large Gifts
Leaving a substantial sum outright may not always be in the best interests of your heirs. While some beneficiaries are capable of managing wealth responsibly, others may lack financial discipline or face personal challenges such as addiction, debt, or divorce. A lump-sum inheritance can be quickly squandered. Establishing a trust is often a better approach. A trust can allow you to control the timing and conditions of distributions, provide professional management, and safeguard assets against creditors or imprudent decisions. Structured planning helps ensure that your wealth benefits your loved ones over the long term rather than disappearing quickly.
Gifting can be a powerful and meaningful experience; however, without careful planning, it can cause more harm than good. Working with an experienced New Hampshire estate planning attorney ensures that your gifts support your intentions, minimize conflict, and preserve wealth.
Can We Help You Avoid Mistakes When Making Gifts in Your New Hampshire Estate Plan?
For more information, please join us for an upcoming FREE seminar. If you would like assistance to avoid making mistakes in your New Hampshire estate plan, contact our estate planning attorneys in our North Andover, Woburn, and Beverly offices at (978) 969-0331. Our Salem and Nashua, New Hampshire office can be reached at (603) 894-4141.
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