Maximizing Your Annual Gift | Tax Free Gift Exemption
Trusts & Estate Planning Attorney
by Kira S. Masteller
818.907.3244
If your estate is valued over the Federal estate tax exemption ($5,000,000 in 2011 and 2012 and returning to $1,000,000 in 2013), you should consider making annual gifts to your family now so that those assets that would be received by the family anyway, will NOT be exposed to unnecessary estate taxes .
Your estate includes your:
▪ real estate,
▪ bank accounts,
▪ investments accounts,
▪ retirement assets,
▪ life insurance,
▪ personal property, and
▪ all other assets
Annual Gifts that Don’t Keep on Giving (to the Government)
You are allowed to give $13,000 to as many individuals as you desire each year prior to December 31st without having to report the gift to the IRS, and a gift of $13,000 or under will not reduce your lifetime Gift Tax Exemption (presently $5,000,000; scheduled to return to $1,000,000 in 2013).
This means that you can give your son $13,000, his wife $13,000, and each of his three children $13,000 so that you have removed $65,000 that would be taxed at a rate of 35 percent (in 2011-2012; may return to 45 percent in 2013) if you left it in your estate and paid estate tax upon your death.
You can also directly pay tuition for students (your children, grandchildren and great- grandchildren), and health care expenses without affecting your lifetime Gift Tax Exemption. This is another way to help your family and reduce your exposure to Federal estate tax at the same time.
Of course when you have less assets in your estate, you may earn less income. This is something to consider prior to making gifts. Alternatively, if you are paying excessive income taxes, by reducing your income annually, you will pay less income tax annually.
If you have any questions regarding making annual gifts, you should contact your estate planning attorney or accountant to determine whether or not you should plan to make annual gifts to reduce the value of your estate.
Kira S. Masteller is a California Trust Attorney in our Trusts and Estate Planning Practice Group. For more information, call Ms. Masteller at 818.990.2120.