The Annual Gift Tax Exclusion: A No Strings Attached Way to Help Your Family Members Financially
If you think about your estate plan in enough detail, you will discover that almost anything you do to help the beneficiaries also creates some kind of a burden for them. If you leave them a real estate property, they will have the task of maintaining it; if the house is to be shared among siblings, things can get very acrimonious very quickly. A group of siblings who must decide at what price to sell their deceased parents’ house have less of a chance of reaching an agreement peacefully than the famously cheery Buddy Bears when asked to choose pizza toppings. To your children and grandchildren, your most cherished personal belongings are just clutter. You might think that just leaving money to your heirs is the solution to all these problems, but the taxes on inherited money are so high that the money will not go nearly as far as you think it will. One of the easiest solutions is to give your money to your family members in relatively small installments, while you are alive. In addition to being around to see them benefit from the money, you will get to find out how they use it, which will give you a better idea of what they need and what they value, which will enable you to write your will in such a way that your estate will do the greatest amount of good. Talk to a Central Florida estate planning lawyer about the annual gift tax exclusion, and you will end up also talking about so much more.
With the Annual Gift Tax Exclusion, the Possibilities Are Endless but the Taxes Are Zero
Your heirs will have to pay taxes on the money they inherit from you, so why not just give them their inheritance money while you are alive? If you just give them the money in a lump sum, then you will have to pay taxes on it, or else the recipients will. Each year, the IRS sets the amount of money that a person can give or receive as a gift without either party paying taxes on it. This is called the annual gift tax exclusion.
In 2020, the annual gift tax exclusion is $15,000. This means that you can give any person a cash gift of up to $15,000 tax free. Of course, you can make these gifts to multiple people. If you have ten grandchildren, you can give each one $15,000 this year. The annual gift tax exclusion for 2019 was also $15,000, and the exclusion resets each year. If you gave each grandchild the full amount in 2019 and 2020, that is $300,000 from your estate that has passed on to the beneficiaries tax free.
The maximum amount in tax free gifts you can give in a lifetime is $11.4 million dollars, but each person’s gifts count separately. If you and your spouse are worth more than $22.8 million, you have bigger things to talk to an estate planning lawyer about than just the annual gift tax exclusion.
Let Us Help You Today
Beyond a certain amount of money, your heirs will have to pay some taxes, but your Tampa estate planning lawyer can help you distribute your wealth to your heirs strategically. Contact David Toback for help today.