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.
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.
If you would like to receive more information on making smart money moves for your future, be sure to contact us today!