Creating a blueprint for the distribution of estate assets is usually an important motivation for having an estate plan in place. That blueprint may involve nothing more than a Last Will and Testament and/or a trust agreement that provides for the gifting of all estate assets upon death. Lifetime gifting, however, can also be part of the overall distribution of assets in a comprehensive estate plan. Deciding whether to gift while you are alive or only after you are gone can be a difficult and complex decision. The estate planning attorneys at Morris Hall PLLC explain some benefits of lifetime giving.
Over the course of your life, you will likely work hard and invest carefully to build up the value of your assets. Part of the reason for doing this is to ensure that you are financially secure and comfortable during your retirement years. For many, however, the hope is that there will be assets left to pass down to children and/or grandchildren after they are gone. For those who are relatively certain they will have significant assets left to pass down, deciding when to pass down those assets becomes an important aspect of estate planning. When you make gifts will have a direct impact on everything from your estate tax liability to your personal relationships with beneficiaries.
Why Gift While You Are Alive?
Gifting while you are alive instead of waiting to make them after you are gone offers some important benefits, such as:
- Personal enjoyment. For many, the most important advantage to making lifetime gifts is the simple fact that they are still here to enjoy making the gift and to watch the beneficiary benefit from the gift.
- Reducing your taxable estate. Federal (and in some cases state) gift and estate taxes are levied on your estate during the probate process that follows your death. The tax is calculated based on the value of qualifying gifts made during your lifetime plus the value of your estate assets remaining at the time of your death. Gifting during your lifetime (when done carefully and in consultation with an experienced estate planning attorney) can reduce your taxable estate for gift and estate tax purposes.
- Making tax-free gifts. Gifts made during your lifetime may take advantage of the annual exclusion that allows each taxpayer to make gifts of up to $16,000 (as of 2022) to an unlimited number of recipients each year without those gifts counting against the taxpayer’s lifetime exemption that applies to federal gift and estate taxes. Additional exclusions may apply to gifts made directly to pay for tuition or medical expenses of the recipient.
- Protecting assets from spouses and creditors of the recipient. If you are concerned that assets passed down to a beneficiary might be at risk because of a spouse or creditors of the recipient (or recipient’s spouse), making the gift in a trust while you are alive can help protect the assets you gift.
- Ability to guide and advise. Waiting until you are gone to pass down assets means you will not be here to help guide and advise the beneficiary regarding how to manage those assets. Making the gift while you are still her, on the other hand, has the advantage of also passing down your wisdom and financial acumen along with the gift.
Contact Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about lifetime giving, contact the experienced estate planning attorneys at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.
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