The Role of Gifts in Estate Planning

If you think that your estate might owe estate tax, one way to avoid or reduce the tax is to give away property during your life. For deaths in 2016, you can leave or give away up to $5.45 million without owing any federal tax. This amount goes up every year to adjust for inflation. Married couples can leave up to twice that amount without paying federal estate tax.

In 2016, you can make an unlimited number of $14,000 gifts of cash or other property, tax-free, although no individual recipient can receive more than $14,000 in a calendar year. For example, if you give $20,000 to someone, you pay gift tax on $6,000. Couples can give away $28,000 worth of property tax-free, per year, per recipient. All gifts you make to your spouse are tax-free if he or she is a U.S. citizen.

To make the most of the annual exemption, keep in mind that it is based on a calendar year. Not only can gifts of cash can be spread over several years so can investments such as stocks. If you give a large gift to a child under 18, an adult must be responsible for the money; usually through a trust or custodianship.

Gift-giving is not for everyone. If parting with assets makes you feel uncomfortable, then you should not give gifts. You may decide that your children or grandchildren are not ready to appreciate generosity. However helping a child or young adult with their education or helping new parents buy a house can be satisfying.

If you require assistance with estate planning, consult with an experienced estate planning attorney.

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The personal injury law firm of Goldberg & Chase, LLP. in Brooklyn, New York represents clients throughout the New York (NYC) metropolitan area, including the five boroughs: Brooklyn, the Bronx, Manhattan, Staten Island, and Queens. The counties we serve include Suffolk County, Nassau County, Westchester County, and Putnam County.