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You don't have to save your gifts for after your death

If you are like others here in Boston, or elsewhere for that matter, you may believe that you should save inheritances for after your death. When you begin your estate planning process, you consider the gifts you want to give to those you love.

While that is a goal of estate planning, it might not be the best option. Perhaps your estate will exceed the estate tax exemption, which would mean owing money in taxes that will diminish the value of the inheritances you want to leave. On the other hand, those you love may need their inheritances now instead of later, and you want to help them.

You can give certain gifts each year directly to loved ones

An estate planning option you may not know about is gifting. You can give up to a certain amount of assets to loved ones each year without incurring any tax liability. Currently, the maximum amount a tax-free gift can be is $15,000 to an individual or $30,000 to a married couple. The assets can include just about anything as long as it does not exceed those amounts in order for it to remain tax-free. For instance, if you were going to give someone some stock, money or a car, you could do it now if it doesn't exceed that amount.

If you worry about whether your loved one will have to pay taxes on the gift, the answer is no. In fact, he or she does not even have to report it as long as it is within the current gift tax exclusion amount. If you have reservations about giving someone the full amount because he or she may misuse it, you could put it into a trust for that person, which would dictate how and when distributions occur.

You could make certain payments for a loved one

If you intend to give cash to a loved one after your death but know that he or she is struggling with medical bills right now, you could pay those bills directly as a gift. If you have a loved one going to college, you could pay his or her tuition directly. These two types of gifts allow you to give an unlimited amount. For instance, if a family member you intended to gift to at your death has $50,000 in medical bills, you could pay them directly without any tax ramifications.

The other good thing about giving these two types of gifts is that they do not affect your annual gift exclusion. So, you could pay medical costs or tuition and still give the same person up to $15,000 -- all without incurring any tax for either of you.

You do need to be careful, though

As good as this sounds, there are some rules of which you need to make yourself aware. In order to make sure that you and the recipient do not incur any tax on a gift, you may want to discuss your intentions with an experienced estate planning attorney first.

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