Gifting Doesn’t Have to Be A Tax Headache

With the current lifetime estate tax at an all-time high of $12.06 million per person, you may not be thinking much about your long-term estate strategy. However, history has shown this amount has fluctuated which requires ongoing planning. In fact, the estate tax is set to sunset in a few years to $5 million adjusted for inflation, so this is something that should be on your radar.

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Working with clients who have various sizes of net worth, we believe one of the most effective estate planning tactics that is not discussed nearly enough is utilizing the annual gift amount each year. This allows you to gift any person $16,000 in 2022 ($32,000 per married couple) and $17,000 in 2023 without having to file gift tax forms or reducing the amount you can leave behind to your heirs. This amount has increased over the years as the IRS tries to keep pace with inflation. Why is this important? If you would like to transfer wealth over time this can be an extremely effective strategy. Do you want to have money saved for college for a child, or enough money for a down payment on house one day? This could be your answer to get there.

One key piece of information to remember is that the lifetime estate amount of $12.06 million does not include the annual gift amount given. Only when you gift over the annual gift amount is that deducted from the lifetime estate.

As 2022 comes to a close you might want to start considering your family's goals for next year. It's so important to make sure you have an up-to-date estate plan (see tips below). Gifting money to those you plan to help over time may be one of those strategies. In addition, as you set your new year's goals it may be a great time to make sure you've completed or updated your estate plan with a qualified estate planning attorney. Having a will, medical directives, and power of attorney can be extremely valuable to your family. If you don't make this a priority, the state could be left deciding your estate for you.

• Contact a local attorney to setup your estate plan. If you don't have a contact, ask your current CPA or advisor for a referral. An online service like Legal Zoom is not recommended.
• Discuss your family's goals and what's important to leave behind, or to gift while alive. Putting money into 529 education plans or custodial investment accounts may be a consideration that could prove extremely beneficial down the road.
• Make sure someone has a copy of your executed estate plan i.e., your financial planner, executor, or another close family member whom you trust.