In 2017, the federal estate tax exemption is $5.49 million. A recent article from CBS Boston, “Our Families: Giving It Away,” explains that if your estate is worth more than that, gifting is a straightforward way to lower your tax exposure while allowing you to enjoy watching your heirs or favorite charities benefit from your generosity. Don’t forget another part of this estate planning strategy: in life or death, married couples have an unlimited gifting privilege called the “annual gift tax exclusion”.
The annual gifting exclusion a person can give away is $14,000 year to as many recipients as we want—provided that you have the money. Married couples can gift $28,000, or $14,000 each.
If you give away your money efficiently, your estate won’t be reduced by paying an estate tax when you die. Therefore, you can whittle down your estate by maximizing your gift exclusion giving to reduce the estate that is potentially subject to estate taxes.
Not only can gifting be an estate planning tool for you to save on future estate taxes, but you can enjoy watching your dollars work for your children or grandchildren while you’re still alive.
However, you shouldn’t give away assets that you might need in the future; And, again, if you’ve done any irrevocable trust planning to protect assets from the nursing home (what we in our office often call a “lockbox”), you’ll want to consult with your trusted advisors before making any gifts. For our clients with this type of planning in place, consider this a friendly reminder to please call our office before donating to charity, making any gifts or making payments on behalf of another.
You are allowed to pay for tuition for your grandchildren if they are in college or grad school, but remember that you have to make the payments directly to the college or university. Speak with an estate planning attorney and the school’s financial office to ensure that these payments are made properly. Even if you cover these costs, you can still gift them $14,000 for the year, or double that amount if your spouse joins in.
For more information, explore our website and contact us to schedule a consultation today!
Reference: CBS Boston (November 24, 2016) “Our Families: Giving It Away”
