'Giving while living' alters inheritances

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.)

Combined, a husband and wife could give each child $24,000 a year without filing gift-tax forms. With five children, that's $120,000 a year.

Baker's father, a physician, died several years ago, but his mother keeps on giving.

"Our dad's philosophy was give it to you now while you need it — no strings attached," says Baker, 52, of Highland Mills, N.Y. He and his siblings have used the money for retirement savings, education, home improvements and "everything from septic systems to vacations."

Andy Harwood's grandfather, an orthodontist, died several years ago. When his grandmother died 18 months ago, Harwood's parents immediately began using the inheritance they received to give money to their two sons.

Harwood is using the first $12,000 he received to buy new hardwood floors in his family room, as well as a home theater system.

"My grandparents lived within their means and planned for the future," says Harwood, 38, of Denver. He expects the additional money he will inherit from his grandparents after the death of his parents to be "substantial."

He says he was surprised when he found out how much money his grandparents had left.

"They were always tight-lipped about what they had," he says, "and where they had it."

A few get the most

Inheriting money in America is a touchy subject. Everyone wants to; few do.

Fewer than one-quarter of Americans ever inherit money, according to an AARP study, and most of it goes to the wealthiest people — those with net assets exceeding $450,000.

Among the lucky few are people such as Carl Hixon of Pensacola, Fla., whose grandmother's grandfather was a partner of John D. Rockefeller, still the wealthiest American ever (adjusted for economic growth over time).

Hixon receives quarterly income from two trusts set up in 1908 and 1916. The initial fortune has been split by following generations, but it's still tossing off cash.

"It's amazing how it spreads over 100 years," he says.

Hixon's father, despite his wealth, "watched every nickel," he says. "We had to tear paper towels in half before we dried our hands, and squish little pieces of soap together to keep using them."

He didn't realize they had substantial money, Hixon says, until his mother died in 1983, and "I started seeing these checks coming in. I didn't have a clue!"

The checks were quarterly payments from the two trust funds that no family member had ever mentioned to Hixon.

The money has meant that he has never had to do a job he didn't want to do. He worked for 20 years in the restaurant industry and now owns an Italian restaurant where his three sons work.

"I'm thinking about my grandchildren," he says. "I want to do for them what my grandparents did for me. I want to make sure it continues."

Eight years ago, the Center on Wealth and Philanthropy at Boston College ignited a furor with a new economic model predicting that $41 trillion — at a minimum — would be "transferred" among generations in the coming 55 years (1998-2052).

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