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When estate planning, can giving gifts avoid tax implications?

As New Yorkers take steps to plan their estate, there are many alternatives available that should be weighed and considered before jumping in with both feet. For those with substantial assets, a major concern will be how to protect their beneficiaries from a massive tax bill after the person dies. For those who would like to avoid the tax implications, it might be a wise step to consider giving gifts before death in lieu of wills and other common documents in an estate plan. Understanding the options with gifts is imperative.

It must be remembered that there are new tax codes being implemented, so numbers might change. In 2017, the annual gift exclusion was $14,000 per recipient. This is a tax-free gift. A gift tax is in effect for any amount that went beyond $14,000. For people who are married, that amount is doubled, as each spouse can be given $14,000 each, making the tax-free total $28,000.

Spousal gifts can be given if the person is married to a U.S. citizen. There are no limits to the gifts that can be given to a spouse, and spousal gifts are completely tax free. When the spouse is not a citizen of the U.S., there is a limit. In 2017, that was $149,000. It is also important to remember that the time at which the gifts are given can affect taxes. Gifts cannot be given retroactively, and exemptions are contingent on the calendar year. If an individual wants to go beyond the maximum amounts, the gifts can be given at separate times as long as the calendar years are different. Giving one part of a gift in December and another in January can avoid the taxes.

When giving gifts to minor children, management can be a concern. It is smart to do this through an irrevocable trust or a guardianship. For the exclusion of the gift tax, the gift must: grant the child ownership when they turn 21 and the remaining property will go to the minor's estate or beneficiaries if the minor dies before turning 21.

Tax implications are an unavoidable issue when formulating strategies for an estate plan. Those with substantial assets who want to shield loved ones from large tax bills after death can take the step of giving gifts. Having legal advice from a law firm that specializes in estate planning will help with this goal.

Source: FindLaw, "Reducing Estate Tax - Gifts," accessed on Jan. 9, 2018

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Weinstein & Randisi
290 Linden Oaks, Ste. 200
Rochester, NY 14625

Toll Free: 800-768-1780
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