'Giving while living' alters inheritances

— -- You used to have to wait for a loved one to die before you found out how much you were going to inherit — if you were going to inherit at all.

No more. Now, if you're among the lucky minority of Americans who have received an inheritance or expect one, you're increasingly likely to get at least some of it while your relatives are still alive.

"Giving while living" is becoming popular as more Americans decide to spread their money around while they're still here to see its impact. They're giving to children, grandchildren and others. They're paying for college educations and providing down payments for houses. They're setting up trusts and paying for vacations.

To keep families working together and to support favorite causes, more Americans are setting up private foundations and hiring their children to run them or serve on the boards. The number of independent foundations has jumped 77% in the past 10 years to 63,059, according to the Foundation Center in New York. Nine out of 10 of them are family foundations.

It's not just the super-wealthy, mega-wealthy or the insanely wealthy, such as Bill Gates or Warren Buffett, who are doing it.

"You don't have to have millions of dollars to transfer wealth," says Michael Yoshikami of YCMNET Advisors, a wealth-management firm in Walnut Creek, Calif. "Most people assume it's just the Kennedys or Rockefellers — but it's not."

Yoshikami says he's been seeing more "regular" people interested in various types of what financial advisers call wealth transfers.

According to a USA TODAY/Gallup Poll of 1,012 people taken this month, 22% have received what they regard as a large gift of money from relatives who were still alive. (These were gifts beyond those given for special occasions, such as weddings.)

Of those who spent the money, 48% used it for a down payment on a home, 14% to buy a car and 11% for a college education.

"Some people are giving everything away before they die," says Eric Green, an estate attorney with Convicer & Percy in Glastonbury, Conn. "They want to see how it turns out."

As for inheriting money after the death of a relative, 28% of those polled by USA TODAY expect to receive money once their relatives die; 8% expect $1 million or more. And 26% say they've already received an inheritance from a deceased relative.

The merely affluent — people who saved and invested well, made money off modest homes they lived in for decades and then sold for several times what they paid — are among those giving inter vivos (Latin for "giving amid life"), wealth advisers say.

Some who saved and invested well are even helping their grown children who earn far more than the parents ever did, says Randy Carver of Carver Financial Services in Mentor, Ohio.

"One of my clients is a piano tuner who probably never made more than $20,000 a year," Carver says. "He's got $1 million in savings, and he's supporting his kids and grandkids."

Folks who are giving while living include people such as Tom Baker's parents, who for years have given each of their five children the maximum they can give without filing gift-tax returns to the IRS.

Currently, that's $12,000 from each person to each recipient. (Everyone is also entitled to a lifetime gift-tax exclusion of $1 million to give away over a lifetime. This is separate from the $12,000 that people can give, per person, per year, without triggering the gift tax. Example: If you give someone $13,000, only $1,000 counts against the lifetime exclusion.)