3 Gifting Strategies to Help You Easily Transfer Your Wealth

3 Gifting Strategies to Help You Easily Transfer Your Wealth
27 Oct 2018
If you want to transfer wealth and avoid excessive taxes, taking advantage of smart gifting strategies is the way to go. Here are 3 to consider this year.

Did you know that even when you give or receive a sum of money, the government may have their hand out for their share?

There are many rules and tax laws that apply to estate gifting. If you are in that position, you’ll want to familiarize yourself with these laws.

When is the best time to gift some of your estate? Is there a limit to what you can give? Do you wonder if hiring a financial planner is your best bet to get an estate tax exemption?

If you have wealth that you’d like to transfer in order to avoid paying excessive taxes, taking advantage of smart gifting strategies will save you in the long run. Here are 3 that you’ll want to consider this year.

3 Smart Gifting Strategies

The IRS rules change often, but fortunately, they raised the amount that escapes taxation. You’ll also note that there are ways to give away money or other assets that are tax-free.

1. Make Direct Payments to Institutions

One way to reduce your taxable estate is to transfer some of your wealth to a loved one by making direct payments to a medical provider or a university or other similar educational institution.

If, for example, one of your adult children needs expensive medical treatment, rather than giving the needed money to him or her, you would pay the hospital directly. Do the same in the event that you want to contribute to someone’s educational costs.

Besides lowering the value of your taxable estate, you will not be adding to the amount of your lifetime exemption.

2. Use the Annual Gift Tax Exclusion

The annual federal gift tax exclusion (or gifting limits) allows you to give away up to $15,000 in 2018, that is up from $14,000 last year. You can give that amount of money to as many people as you’d like without it counting against your lifetime estate tax exemption.

The lifetime exemption, the total amount you are permitted to give away in a lifetime, for 2108 is $11.8 million. When you die, if your estate is worth more than the balance of the exemption, an estate tax will be collected on that amount.

Gift Tax vs. Estate Tax

“The estate tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death.”

“If you give someone money or property during your life, you may be subject to federal gift tax.”

The amount you use for gifting will be subtracted from the amount you can use for the estate tax. This is called a unified credit by the IRS.

3. Give Away Assets That Will Appreciate in the Future

If you own a property that you know will appreciate and you give it to your children now, you will save yourself from counting that appreciated value in your assets. You will also keep your children from paying tax on the appreciated value as well.

Things to Remember

While these are federal guidelines, your state may have other laws regarding gifting and estate taxes.

Be sure that your plan includes leaving enough money to live comfortably before giving away a chunk of your estate.

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Daryl Seaton