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Finances And The Future

Take advantage of tax-free gifting to avoid high estate taxes

| Feb 23, 2012 | Estate Planning

If you have begun the process of planning your estate, you probably know that we are currently in one of the most favorable estate and gifting environments since the creation of the Internal Revenue Code. This means that, until the end of 2012 (pending any extensions or new legislation on the matter), New Jersey residents will be able to secure several significant financial benefits through careful handling of their estate plan.

Under current tax laws, people are able to both give and receive gifts completely tax-free, as long as those gifts do not have a total value of more than $13,000 per recipient. The estate tax code also allows for unlimited giving and receiving of gifts for educational and medical expenses. This means that you can minimize or completely eliminate your federal estate tax burden by giving money or assets as lifetime gifts instead of including them in a traditional will.

There are several ways to convert assets to lifetime gifts other than outright giving. Some, such as using trusts, LLCs, asset sales or promissory notes, will help the giver to multiply their gifts and retain some level of control over the assets while still reaping the benefits of the current gift tax exemptions.

Other current benefits for people who are planning their estate include the current combined gift and estate tax exemption of $5,120,000 per person, historically low interest rates and the pervasive undervaluation of real estate across the board. Taking advantage of some or all of these benefits will allow you to realize an estate plan that will help your children and other members of your family for years to come.

Source: Forbes, “Tax Free Gifting During 2012 – A Great Deal!” Rob Clarfeld, Feb. 14, 2012

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