An important factor in play when you are engaged in estate planning is the estate tax, which is why it so frequently discussed. If the value of your assets does not exceed the exclusion the entire matter is simplified a great deal, but if it does you need to take action. There are a variety of strategies that can be employed in an effort to bring the taxable value of your estate within that exclusion amount, and the right combination is going to vary depending upon the specifics of the situation. But one way that just about everyone can reduce the value of their estates while getting some enjoyment out of doing it is by giving tax-free gifts.
We have looked at gift giving previously, but to recap each person can give as much as $13,000 every year to an unlimited number of recipients without incurring any gift tax liability. Since this is per person, you and your spouse could each give $13,000 to your child and his or her spouse, meaning that a total of $52,000 could be transferred to them each year free of the gift tax. If you do the math you can reduce the taxable value of your estate quite significantly if you were to give these annual gifts to your heirs over a period of years.
But the gift tax exemption that we would like to highlight here is the medical gift. You can pay the health care bills of as many people as you want to equaling an unlimited amount of money free of the gift tax, and as you do it you are reducing the taxable value of your estate. Nobody wants to see a family member ill, but these gifts can at least mitigate the financial impact of the illness. You can also use this exemption to pay for health insurance and even long-term care insurance, and this type of truly practical, utilitarian gift can provide some family members with a great deal of peace of mind while saving them a lot of money.