A fellow attorney (and award-winning journalist) Deborah Jacobs authored the book, “Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide”. In her Forbes article titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is a question every financially savvy woman should be able to answer.
Should you give away assets now to save taxes?
Now that the estate tax exclusion has gone to $5 million per person ($10 million per couple), this issue concerns fewer people. Keep in mind, too, that most methods of saving estate taxes require you to totally give up ownership and control over assets, whether you are giving them to people directly or putting them in a trust. A threshold question for anyone contemplating this strategy: Can I afford it? Be sure you are leaving yourself enough, and to be on the safe side, you should assume you will live to an advanced age.
You can give anyone $13,000 a year (a couple can give $26,000) without eating into your $5 million exclusion. If you want to give away more than that, you can either count your gift against the $5 million exclusion amount or, if you have used up the tax-free amount, pay gift tax of 35%. Remember that each dollar of the exclusion used during life shaves a dollar off what is available for your estate to use after your death.
So before you dip into the lifetime exemption, consider some simple, tax-free ways to prune your estate. They include paying tuition and medical expenses for another person (such as a grandchild) directly, funding 529 college savings accounts and converting a traditional IRA to a Roth.
This concludes the “Estate Planning for Women (and the Men Who Love Them) series. I hope you have found these posts thought provoking and valuable. Questions like these can often trigger even more questions in your mind. Please accept my invitation to schedule a meeting where we can discuss these topics and others that might be relevant to your estate planning. Give my office a call to set a meeting.