It can be a very comforting feeling to recognize the fact that your legacy will be sufficient to make a significant difference in the lives of your loved ones. Of course most people want to make things easier for their family members, but you also want to beware of taking away the incentive toward personal achievement. The ultimate peace of mind comes with being able to see that your family members are stable and responsible in their own right while you are still alive so that their inheritances will provide added strength to an already solid foundation.
If do you find yourself in a position where you can give your family members life-changing financial resources you probably have to concern yourself with the estate tax. Right now it is carrying a $5 million exclusion but if the laws remain as they are on this day that will be reduced to just $1 million in 2013. As a result you may want to look for ways to gain estate tax efficiency.
One option that is available would be to engage in the practice of tax-free gift giving. There is a gift tax in place to discourage this practice, but there are a handful of exemptions available to you and one of them is the educational gift exemption. Each taxpayer can pay the tuition of any number of students as a gift without incurring any gift tax liability, and these gifts do not impact your available unified lifetime gift/estate tax exemption.
Though you may not use this exemption to pay for books, fees, and expenses there is another exemption that can be utilized. You’re entitled to give as much as $13,000 every year to an unlimited number of people free of the gift tax, and these gifts don’t count toward your lifetime exemption. So you could use this to defray the expenses of your students, and if you’re married you and your spouse could pool your respective exemptions and give as much as $26,000 per year to cover the additional expenses.
Latest posts by Saul Kobrick (see all)
- Senior Suicide – Do You Have a Loved One at Risk? - March 21, 2019
- Durable Power of Attorney and Elder Care Considerations - February 28, 2019
- When Is Probate Not Necessary in New York? - February 26, 2019