PASSING ON WEALTH TO HEIRS

Giving away assets during your life time can help reduce the size of your taxable estate in the future. There are few common strategies we would like to share with you:

The first tip is to use the annual exclusion by December 31 of each year. You can give up to 15,000 per recipient in 2020 without reporting anything and without reducing the exemption amount that will be used in the future to reduce your estate tax. A Married couple can transfer 30K to each recipient during 2020.

To minimize estate tax, gift property with the greatest future appreciation potential. For example, ownership interest in your company. If you have losing stocks in your portfolio that you plan to gift, it’s best to sell, so you can take the tax loss. The proceeds from the sale can be gifted.

Another strategy is to consider paying tuition for your children or grandchildren. This is not considered a taxable gift as long as the amount is paid directly to the educational institution. You can also consider paying medical expenses for your family members. The tax code allows this as a nontaxable gift. Like tuition payments, it is critical that the payments be made directly to the person or entity who provides the medical care.

Finally, a 529 plan is a tax vehicle for which you can save money primarily for college and graduate schools, usually for your children or grandchildren. Money grows in these plans tax free as long as the funds will be used for qualified higher education.  You can gift a lump sum of 75K (or 150K if joint) to a  529 plan for children or grandchildren and it has no  gift or estate tax implication.

For more information on how these strategies might apply to your specific situation, contact our office to learn more about how to reduce your taxable estate for the future.