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Don't Leave Gift Taxes Out of Estate Planning
Author: Scarinci Hollenbeck, LLC
Date: July 3, 2013
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When individuals and business owners begin estate planning, establishing a will and testament is often their first priority. In cases of high net-worth households and those who plan to pass business assets onto the next generation, a trust is also another popular element of estate planning. However, one of the most underutilized components that too few people may use when creating a comprehensive estate plan is utilizing current gift tax allowances.
The gift tax, which is indexed for inflation each year, enables individuals and spouses to gift a certain dollar amount – either in assets or monies – to family members, friends, business associates and the like up to a certain amount on a tax-free basis. For the 2013 year, individuals can gift up to $14,000, while spouses can gift a combined $28,000. Because the funds are not taxable, individuals can successfully lower their taxable income, which reduces the amount of estate taxes that may levied in the future. For 2013, a deceased individual’s estate is not subject to estate tax at the federal level until its value exceeds $5.25 million.
This method is a popular strategy for transferring wealth while an individual is still alive, and also has the added benefit of giving donors more control and authority on how the proceeds are used, according to Fox Business. For example, business owners who are grooming children or business associates to take over the business may choose to gift investments, property, or other assets while they are still alive to advise successors on how the gifts should be used.
As an added benefit, taxpayers are permitted to make these gifts to as many recipients as they wish without those gifts facing federal taxes, assuming they stay within the current thresholds. Therefore, for those who are planning to distribute a portion of their estate to several beneficiaries, making full use of the gift tax law to begin transferring assets can greatly help reduce the amount at which the final estate will be taxed.
- Practices: Tax and Trusts & Estates, Corporate Transactions & Business, Sophisticated Estate Planning & Wealth Preservation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
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