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Mom and Dad Hope You are Reading This!!! Savvy Planning for Lifetime Gifts to Children



I, of course, am joking about the Title of this post. I am extremely fortunate to have such supportive and generous parents for which my family will be forever grateful.

Known as the “basic exclusion,” in 2014 the IRS increased the limit of allowable tax-free transfers during life or upon death. In 2017, the state and gift tax exemption is $5.49 million per person. You can give away up to $14,000 per person per year to as many people as you want without using up your basic exclusion, and that can take the form of cash or any other asset. There are some details you’ll need to know.

A recent article in FEDweek, “Gifts to Children Require Careful Planning,” explains that the lifetime gift tax exclusion, or “lifetime exemption,” and the estate tax exclusion are expressed as a total amount. You can use the basic exclusion—otherwise called the “unified credit”—to transfer assets at either stage or a combination of the two. But if you go over the limit, you or your heirs will be liable for a tax of up to 40%.

The IRS expects you to keep track and report these gifts, so it will know how much has already been used up when you pass away. Here’s one recommended sequence for making the gifts.

  1. Life Insurance Policy. If you pass away owning an insurance policy that’s payable to a person other than your spouse, the proceeds will be included in your taxable estate. Even if the proceeds go to your spouse, they’ll be added to her taxable estate. An alternative is to give the policy to your grown children or to a trust. Because of the way in which insurance policies are valued, you’ll likely owe little or no gift tax. Three years after the transfer, the policy will be excluded from your estate. If your policy has substantial cash value and giving it away would generate estate tax, you can borrow as much as you can from the policy to decrease its value, before giving it away.
  2. Discountable Gifts. Interests in real estate or in a closely-held business may be eligible for valuation discounts.
  3. Cash. There’ll be no valuation issues or deferred tax consequences with cash gifts. Simple is sometimes a better option.
  4. Appreciated Securities. Any assets given away will keep their basis. As a result, the recipients will owe capital gains tax if they sell the assets, but this is likely not to be a large tax. Assets that have had a modest appreciation may be optimal to give away. This is also true with assets such as a family vacation home that the recipients aren’t likely to sell.

Your estate planning attorney will be able give you guidance so that your gifting maximizes any economic advantages to your family and your estate. Also, keep in mind the impact that your gifts may have on recipients. It may be better for some recipients to receive assets in a more controlled fashion, particularly if there are problems with money management, drug use or a shaky marriage.

Do you live in Miami-Dade, Broward, or Palm Beach counties in Florida? Laws are constantly changing-- has your estate plan been reviewed in the last 2-3 years? Call me (954-888-1747) right away for peace of mind. I can help!

  • My practice is exclusively estate planning and probate,
  • I have prepared numerous estate plans in 16 years of practice,
  • I have administered estates and trusts through Probate all over Florida,
  • I am a Certified Financial Planner Professional™, and
  • I am here for YOU today and there for your FAMILY tomorrow.

Reference: FEDweek (December 15, 2016) “Gifts to Children Require Careful Planning”

Why would we recommend D.T.F.? Several Reasons: Your ability to explain complex estate problems, clearly and patiently; your total lack of arrogance and pretense; a strong feeling that you are motivated by what you perceive is best for your client, rather than what would generate the largest legal fees; finally, and importantly, you are a lovely guy. A.C.

Two words cannot sum up the entire process of creating my “trust.” I enjoyed your attention to detail, your patience of explaining terms and conditions until I understood, also giving me copies to read and understand. Thank you for your suggestions on what was best for “me” but still allowing me to make my choice. Most of all, thank you for thinking of “me.” Wells Fargo said “you were the best” I cannot deny that. Again thank you very much for everything. Anna is an asset or a compliment to the firm. She is warm and very caring. It was great doing business. Thank you.