Estate planning can seem very similar to the other forms of financial planning that you’ve done throughout your life but there is one very profound difference: you won’t be around to see the result. Though it is comforting to know that you have left a legacy behind the fact that you can’t see your family members enjoying their inheritances can leave you with a somewhat empty feeling.
However, there is a foundational estate planning strategy that can be implemented that allows you to actually see the smiles on the faces of your loved ones in the form of tax-free gift giving.
The federal government is well aware of the fact that people may choose to give gifts while they are still alive in an effort to circumvent the estate tax, so there’s a gift tax in place that is unified with the estate tax. Even though there is a $5 million lifetime gift tax exemption it is unified with the estate tax exclusion, so if you use it to give tax-free gifts your estate tax cushion is being reduced by the amount of these gifts.
Fortunately there are some gift tax exemptions that do not impact the lifetime unified exclusion. You are allowed to give gifts of up to $13,000 to as many people as you want to each year, free of the gift tax. This is a per-person exemption so if you are married you and your spouse could give as much as $26,000 annually to an unlimited number of recipients.
If you do the math and plan ahead, you can see how giving these tax-free gifts over a number of years could go a long way toward reducing the taxable value of your estate, and you get the added benefit of being able to experience the joy of giving while you are still alive.
Latest posts by Saul Kobrick (see all)
- New Tax Law May Affect State Income Tax, Too! - February 20, 2018
- Planning for Retirement Plans and IRAs: Asset Protection - February 15, 2018
- Sager Family Shows Perils of Blended Families - February 13, 2018