Not sure whether giving your adult child their inheritance early is the right thing for you to do? Use these considerations to help you decide.

Whether you want to simplify your estate planning, watch your children enjoy their inheritance while you are alive, or rescue your child from a financial crisis, you may decide to give your kids their inheritance early. Setting aside the emotional aspect, you could be risking your own financial future: Can you be sure you won’t eventually need that money yourself? Here are six things to consider when deciding if you should give your children their inheritance before you die:

1 Whose Idea Is It?

The key to making a good decision on this issue, to avoid inciting conflict, is clear communication.

The answer to this question could tell you a lot about whether the idea to give your child their inheritance early is a good one. Regardless of who brought it up, the key to making a good decision on this issue, to avoid inciting conflict, is clear communication. Discuss with your child why you may or may not want to give them their inheritance early and listen to their reasons for wanting it now or waiting. Delving into the reasons, both yours and theirs, will help you make the right decision for everyone. Make it at least a two-part discussion, taking some time in between sessions to re-think your position.

2 Will It Be Fair?

Mixing money and family can be volatile. If you have more than one child, you are familiar with the fairness issue. One of your children may be in a position to really need that extra money now. Another may have passed that point and is financially secure. Your decision could create conflict. Taking the time to consider each child’s viewpoint is important, but also consider seeking advice from a trusted friend or advisor. Ultimately, the decision to give your children their inheritance early and how much to give them is yours, but using the information you gather from others to communicate your decision can help all parties feel they are being treated fairly.

3 How Well Does Your Child Manage Money?

You want to believe that when you give your child the money you worked hard to earn and save, they will do something worthwhile with it. By giving them their inheritance early, you can watch them make a shrewd investment or develop better money management skills. But if your child squanders that money, how will you feel? If you have concerns that your child will mismanage the money you give them, you can work with a financial advisor to set up a special trust. You can appoint a trustee to manage the assets, which will be distributed to your child a little at a time. Because your child will not manage the trust, creditors won’t be able to access it to pay off debts and the funds cannot be used to pay legal judgments levied against your child.

4 Do They Need the Money Now?

It’s not uncommon that children in their 20s and 30s have fiscal needs that an early inheritance can meet. With an early inheritance, your child could pay off a school loan, start a family, or begin a business with less money pressure. They could also use it to buy or renovate a house, build an addition for you or a growing family, or pay down a mortgage. Talk with your child about what they plan to do with the money if you give it to them now. Be clear that the money would be a one-time gift. They may reconsider and prefer waiting to receive their inheritance.

5 What About Your Grandchildren?

It might make sense to give money directly to your grandchildren if your intention is that they benefit from your child’s inheritance. There are ways to set aside money for your grandchildren to use when they get older. You could pay education expenses directly or consider a 529 plan for their education or a trust they can access when they turn 30 (or any age you designate). Investing money for your grandchildren’s future may be one way of giving your children their inheritance early.

6 Are There Tax Considerations?

The best way to answer this question is to talk with your tax advisor, because everyone’s situation is different. It may matter little whether you give your children their inheritance now, when they have to pay federal gift taxes on the money, or upon your death, when they have to pay estate tax. The tax code sets a high limit on how much money you can gift to your children during your lifetime or after death without paying gift or estate taxes. Check with your advisor because the limits may change from year to year.

Giving your kids their inheritance early may have emotional implications, but your most important concerns should be your own financial situation. Decisions that affect your financial future should be made carefully after considering all the possibilities. It is also wise to consult a financial advisor for guidance.