Estate planning, in the early stages, can be daunting, especially if you have assets that need to be divided among several loved ones. Even if you don’t have a lot of money, you still need an estate plan. The truth is that if you own a home or have any real or intangible assets you need to talk to a professional about an estate plan. It is simply financial planning for the future.
Having a will in place is a good first step, but there may be property you want to divest to your children or a charity before you pass away. You can make an annual gift of up to $14,000 per recipient in order to bring the tax liability down on your estate. This is not a taxed gift and later the amount will be indexed for inflation.
If you are married, you may want to make a combined gift of up to $28,000 for each recipient, charity or child because this is also not taxed as a gift. This can occur even if only one of you owns the property.
Gift and estate taxes are relatively high, being 40 percent on anything over $5,340,000. If you choose to use the annual gift exclusion, and you choose to gift more than one recipient, this can greatly reduce estate taxes as your assets increase in value.
Gifting charitable organizations can definitely lower your estate taxes later. The money or property donated cannot be taxed in your estate and gives you an income tax deduction as well.
One option that is not often used is to gift low-basis appreciated stock then turn around and use your cash to buy new shares of the same stock. This is a full tax deduction and the cost basis of the new stock will be higher than the ones you donated to the charity. You avoid capital gains taxes this way.
If all this is confusing, don’t worry. An attorney can explain all about estate planning to you in a way that will make it clear. A trusted professional is an asset that is worth having. Someone who knows the laws of New York can guide you through your planning.
Source: Herald-Dispatch, “Starting an estate plan now is wise” Deborah Miller, Jul. 13, 2014