investing

Handout from the wealthy?

Friday, Jan. 15
Posted: 11 a.m. EDT

Many of the rich are finding themselves doling out money to family and friends in need. According to the sixth annual Wealth and Values Survey by PNC Wealth Management, 29 percent of those surveyed said they've been financially bailing out relatives and friends.

And the richer they are, the more likely they are to help. The survey of 1,046 wealthy individuals conducted last fall shows that among those with $5 million or more in assets, 39 percent had agreed to help, compared with 30 percent for those with less than $5 million in assets.

This is not to say the wealthy aren't feeling as uncertain about their economic situation as everyone else. The survey showed that 88 percent believe it is more important now to live within their means, and half feel the recession provided them with an opportunity to re-evaluate priorities.

But the wealthy are more likely to be financially able to give up to the limit ($13,000 per person this year) without incurring gift tax. Further, the IRS says that in certain circumstances, a person can make a loan to another individual without charging interest if the loan is less than $10,000 -- as long as the borrower doesn't use the money to purchase income-producing assets.

Given the economic environment, it makes sense that intra-family loans and gifts are on the rise, but beware of the emotional pitfalls. Family members and friends may not feel the same obligation to pay the money back, for instance, making the next social gathering rather awkward, if not downright contentious.

Watch a video on the basics of estate planning.

Calculate your estate tax liability.

Bankrate's guide: Estate planning for everyone.

Questions? Comments? E-mail jmartel@bankrate.com

Read more Your Wealth blogs.

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