When you plan your estate you have the best interests of your loved ones in mind, and giving each of your heirs a lump sum of money and/or property that can be easily liquidated is one course of action. However, it is not uncommon for someone to take pause before doing so when it comes to younger people and those who have a history of being poor money managers. It is often wise to be creative and teach important life lessons while you are in the process of giving, and educational gifts can be a good way of doing that, and there is a tax advantage tossed in as an extra bonus.
Giving gifts is a very simple and straightforward way to transfer assets directly to your heirs while you are still living in an effort to avoid the estate tax. Many people are aware of the fact that you can give gifts of up to $13,000 each year to an unlimited number of recipients free of the gift tax, and doing so is one way to gain some tax efficiency. But in addition to this annual exemption, one can also give educational gifts of any amount and these gifts are not subject to the gift tax either. It is worthwhile to note that the educational gift must be paid directly to the school and it can only cover tuition.
When you combine these two forms of tax-free gift giving you have a very appealing option. You can pave the way for your heirs, providing them with an education along with some money each year to cover their expenses. You and your spouse can each give up to $13,000 tax-free, so if you chose to do so your annual monetary gift could total as much as $26,000. Taking care of your school-aged loved ones in this manner gives them an enormous leg up while underscoring the fact that they are ultimately responsible for their own success.
Latest posts by Saul Kobrick (see all)
- 529 Plans: Planning for Education with a Tax and Asset Protection Bonus - September 10, 2019
- The Importance of Communicating Your Plans - September 5, 2019
- Planning for the Unexpected - September 3, 2019