Estate Planning, Probate, Guardianship & Elder Law

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Mary Beth Kelly

How To Establish Annual Gifting

A lifetime gifting program allows you to avoid gift, estate and generation-skipping transfer tax on transferred assets. Under the Internal Revenue Code, you can transfer up to $14,000 per year, per person, to anyone without incurring gift tax or generation-skipping transfer tax. A married couple can give twice that amount, or $28,000 per person, per year. With a lifetime giving program, you transfer this amount annually to the individuals of your choice, typically children, grandchildren and other close family members.

For example, if you give $14,000 per year to two beneficiaries for five years, you will have removed nearly $140,000 from your estate for estate tax purposes (excluding asset growth). After 10 years, you will have removed more than $280,000 and $700,000 after 25 years. Not surprisingly, the amount removed from your estate is increased significantly with each additional $14,000 beneficiary.

Annual exclusion gifts can also be used to shield transfers to an irrevocable trust from gift and generation-skipping transfer tax. The beneficiary must have the right to withdraw up to $14,000 of the transferred funds, but if that right is not exercised, the gifted funds can then be used to purchase life insurance on the life of the transferor or for other investments. This trust can be a multigenerational estate tax-exempt trust or it can become a family “bank” for:

  1. Education
  2. Business acquisitions
  3. Home purchases

Medical care and tuition paid to assist family members or any other individual may be made in addition to the annual exclusion gifts. As long as the gifts are made directly to the medical facility or educational institution, donors can exceed the $14,000 annual exclusion amount without the imposition of gift taxes.

Call The Law Office of Mary Beth Kelly, LLC, in Lake Mary at 407-536-6901 or send an email to discuss annual gifting today.