Gifting While You Can See the Impact

Why put off for tomorrow what you can do today? That adage might ring true for your family, as you try to figure out how to enjoy giving funds to your family today, while potentially saving your family money down the line.

There are many advantages to making gifts to people or organizations, while you are still living, rather than do all of your gifting through your will, reports Tri-County Times in the article “Giving while living.”

Among the reasons is that annual gift-giving can be used to reduce estate taxes. Today’s annual tax break for gifts to individuals is $15,000, which is separate from the lifetime exclusion of $11.4 million per person. Married couples can shield $22.8 million.

Remember that you can give more than $15,000 as a gift, but you have to know the limits. It’s easy to go over this without needing to pay taxes on the gift, but you may need to file a gift tax return. Speak with your estate planning attorney about the limits and when a gift tax return needs to be filed.

You can also make gifts to reduce the size of your estate, without using your lifetime gift and estate tax exclusion, if you want to make certain gifts. Be certain to follow the rules and to pay the institutions directly, and not to the person.

  • Pay medical bills for another individual—pay the health care facility directly;
  • Pay tuition bills for a student—pay the educational institution directly; and
  • Make a charitable contribution to an exempt organization.

Funding 529 accounts is a wonderful way to help the next generation achieve higher education, although those funds can now be used for other qualified educational expenses. There is a $15,000 annual gift limit, but you can bundle five year’s worth of $15,000 gift tax exemptions into an initial $75,000 contribution to one student’s 529 account.

Note that if you die in the five years after making the gift, a prorated amount of your gift will be put back into your estate, but only for tax purposes. The money remains in the 529 account.

Not all gifting is about taxes or inheritances. Special trips with the family make memories across generations and create strong family bonds. Create a vacation with more meaning than a theme park. If the family loves the outdoors, consider a long week in a nature preserve or spend a week volunteering with a reputable charitable group.

Talk with your estate planning attorney about how gifting can fit into your estate plan, while you are still around to enjoy seeing its impact. While you’re doing that, make sure your estate plan is up-to-date and that includes beneficiary designations. Check on how assets are titled and if trusts have been funded. Then, go plan a memorable family vacation.

Reference: Tri-County Times (April 25, 2019) “Giving while living”

Key Suggested Terms: Gift Taxes, Charitable Donations, Inheritance, 529 College Accounts, Lifetime Gift and Estate Tax Exclusion

About the author

Bob Brumfield

Attorney Bob Brumfield has been practicing law since 1984 and regularly receives the “Top Lawyers in California” award as well as the “Client Distinction” and “Client Champion” awards from Martindale-Hubbell.

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