As the saying goes, there are two guarantees in life, taxes and death. Many people take advantage of estate planning techniques in order to maximize the amount of their estates that will pass to their beneficiaries (recipients) upon their death while also minimizing the tax consequences that comes with death.
A common estate planning technique is to give a gift while you are still alive. In the legal world, this is known as an inter vivos gift. This may be unfavorable to some people, since by the notion of giving a gift, you give up your right to ownership of the property or money when you give it to someone else. However, many people take advantage of this technique. By giving a gift during your life to a recipient, you can minimize the tax consequences on that asset.
There is a federal gift tax that is in place, which will tax the gift if the gift is over the annual exclusion amount. For the last several years, this amount was $14,000. However, the 2018 tax law increases the annual exclusion amount to $15,000. What does this mean to you? You can gift an amount of up to $15,000 annually without having to pay a federal gift tax. You can have any number of recipients, so long as each recipient’s gift does not exceed the $15,000. For example, you can give Bill, Bob and Ben monetary gifts of up to $15,000 each, without being subject to the gift tax. That is $45,000 of your current estate that gets passed to your intended recipients without being subject to a federal gift tax. What is also beneficial is that your recipient generally does not have to pay federal income taxes on the gift received.
The annual federal gift tax exclusion of $15,000 is for single tax filers. For tax filers who are married and file jointly, the annual federal gift tax exclusion is $30,000. This means that the annual gift you and your spouse may gift a recipient is up to $30,000. Another advantage of giving gifts is that you can give numerous monetary gifts to the same recipient. For example, if you give a gift to Bob in 2016 up to the annual exclusion amount, you can still give Bob another gift of up to the annual exclusion amount in 2017.
D’Amico Law, P.C. offers estate planning services. If you are interested in learning more about how the new 2018 law affects your estate or if you would like assistance with estate planning, contact our office at 610-444-4555 or email@example.com.