Year End Estate Planning Updates, Part 3

Welcome to part three of this series on year end estate planning. It’s important to review your plans every twelve months so that you can make any changes that may affect how your assets will be handled when you are gone. In the first part, our estate lawyer in Cary NC talked about what documents you should review and why.
Now let’s look at how to take advantage of estate and gift tax savings opportunities.

Gift Taxes | Estate Lawyer in Cary NC

If you have a large estate and want to avoid having your beneficiaries pay a hefty tax on their inheritance, you can give them a tax free annual gift of up to $14,000 per person. It could reduce your estate and give your beneficiary a break on future taxes. If you are married, the amount you can give is doubled to $28,000 per person. The person receiving the gift won’t have to pay taxes on it if it does not exceed those amounts.
For example, if you left someone $14,000 upon your death, he would pay a 40 percent estate tax rate on it. That means he would only get $8,400. But, under the annual gift tax exclusion, if you gave him the same amount, he wouldn’t have to pay taxes on any of it. In addition, you’re lowering your amount of wealth, which means fewer taxes on your estate upon your death.
The gifts can also be made directly to medical providers, educational institutions or political organizations on behalf of others.  For instance, grandparents could pay for a grandchild’s tuition by making the payment as a gift donation. It only applies to tuition and not to books, supplies, or living expenses.
Another example would be someone who wants to help pay for the medical expenses of a loved one. He or she could make the tax free gift directly to the hospital or other medical facility on behalf of the loved one. The qualifying medical expenses are usually the same amount that are deductible under federal income tax guidelines.
Under the tax free exclusion gift, you can give up to $5.43 million over the rest of your life, as long as you are not giving more than the allotted amount to each person. Many of those who have taken advantage of the program think that it has an added bonus – you are able to see your loved ones enjoy the gift.
If you don’t feel comfortable giving money outright to your loved ones, it can be set aside in a Crummey Trust, or Gift Trust. It was designed to allow you to take advantage of the annual exclusion gift tax but give the beneficiaries flexibility in how they use it. The money is in a trust and can be accessed for a period of time, but if it is not, then the funds can be protected and grow. This is a good option in the case of younger children who may not be able to handle a large sum of money. The person giving the gift can designate an age at which the child will be allowed access to it.
In the next part of this series, we’ll discuss some other end of year estate planning options for you to consider.
As always, feel free to contact us with any questions or concerns you may have about estate planning. Also contact our estate lawyer in Cary NC to schedule a consultation if you have yet to start estate planning. It's never too early to make plans for your wishes upon death. In addition, our lawyer is here to help you with all your legal matters, whether it be estate planning, small business, trademarking, copyrighting, or DWI issues.

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