Estate planning and taxes are inseparable. With the idea of preserving assets within the estate, there are a number of considerations going into this including estate taxation, creation of powers of attorney, wills and trusts, and the possible setting up of guardianships. We must consider all of these items when putting together an estate plan meeting all of your goals.
The federal estate tax exemption recently rose to $5.43 million per individual and $10.86 million for married couples. This allows each individual to give away $5.43 million to family members without requirements of having to pay a federal gift tax.
Also, gifts of $14,000 made annually to these family members do not cut into the $5.43 million amount. In other words, an older married couple with two adult children (who are also married) and four grandchildren could give away $224,000 per year. This would include each parent giving $14,000 to each of their two children, $14,000 to each spouse of their children, and $14,000 to each of their grandchildren. This would reduce the older couple’s taxable estate while also allowing them to give away the money to family members without worrying about estate tax consequences.
There are always a number of tax minimization considerations when putting together an estate plan. Gifting money to relatives is just one way to avoid estate tax depletion of assets for money you wish to bequeath to your family members. Attorneys who work in this area of law understand a number of other techniques to shelter money from taxes and other expenses.
Source: Market Watch, “Start giving your money away early,” Bill Bischoff, March 11, 2015