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For some people, estate planning is as simple as sitting down to create a will, but for others a more in-depth approach is necessary to protect their assets and pass on their estate to beneficiaries. If your estate is worth a significant amount of money, you may look for ways to reduce your estate taxes and take more control of your belongings through trusts. Gifting is one way to pass assets on while you are still alive and avoid taxes.
Gifting is a means of leaving your beneficiaries with some of your assets before you die. A gift can be cash, property, investments, funds or any other holdings and possessions you’re willing to part with early. You also have the option to pay for someone else’s medical expenses or school tuition tax free. You can gift up to nearly $12 million before federal taxes kick in.
Annual Gift Giving
Instead of leaving behind all your money at once when you pass away, which could incur taxes if it’s greater than $12 million, you can give up to a certain amount each year to specific individuals. Each individual can receive up to $15,000 from you annually, and you can gift to as many people as you would like. Just know that if you go over that amount, you’ll have to pay taxes on the extra.
An exception to the rule lies with couples. They have the option to combine their annual amount to $30,000 and can only be taxed on money over that number. In addition, couples can give gifts to each other without limits.
Why You Should Gift
Estate planning is all about increasing what is left behind to your loved ones while decreasing the hassle of the transfer. Since gifting is tax-free, you’ll be leaving your beneficiaries with a lot more than they would get after taxes. Gifting while you are still alive also means the value of your gifts has a chance to increase for your beneficiaries over time, making an even larger gift that is still totally free. The last reason you may want to gift is purely sentimental: you can give it to someone in person and get to see them enjoy it.
Gifting is just a small way to make the transition of assets to your beneficiaries smoother leading up to and after your death. You can consult with an estate planning lawyer, such as Patterson Bray, to see if gifting is the right option for you.