Along with estate planning come tax considerations. Taxes and expenses easily can deplete the assets we would like to preserve and pass on to our heirs.
The tools that estate planning’ attorneys prepare for their clients sometimes minimize both taxes and expense. These tools include powers of attorney to assure that someone we trust in there to make decisions for us when we are unable to make those decisions. Trusts can be set up to shelter certain assets from taxes. Finally, we need to keep tax consequences in mind when preparing will language regarding distributing of assets.
One way to lower the amount of taxes our heirs will pay is to gift them certain amounts of money while we are still alive. Keep in mind that the federal estate tax exemption is now at $5.43 million per person and $10.86 million for married spouses. What this means is that each person we bequest money to is allowed to receive up to $5.43 million in gifts during their lifetime without having to pay any tax upon that amount.
The gifts do not necessarily have to stop at the $5.43 million mark, however. Every year we can pay $14,000 to family members without concerns that this will go towards the $5.43 million amount. An older married couple with two adult married children and four grandchildren could potentially gift $224,000 every year to these family members without concerns it will go towards an amount eventually facing estate taxation. The couple could each year provide their two children, two spouses of their children, and four grandchildren $28,000 – or $14,000 a piece from each parent.
This is just one means of reducing the amount of depletion to the estate. Attorneys working in this area of law can advise you on other means of keeping taxes and expense to a minimum as well.
Source: Market Watch, “Start giving your money away early,” Bill Bischoff, March 11, 2015