Benefits of Gifting

The Revocable Living Trust is the first step in creating an effective Estate Plan. For persons in need of additional estate planning, I can evaluate your current plan to see if you are fully maximizing the advantages available to you and can assist you in incorporating additional planning techniques.

Careful estate planning may be used to reduce your taxable estate and/or provide the liquidity that is necessary to cover your estate taxes without additional tax consequences. The following are a few techniques that have been used. This is not a complete list, however, so please consult with your estate planning attorney for other options that may be available to you.


Gifts and charitable giving

Giving now reduces taxes later

Gifting Program.

You could institute gifting programs whereby you utilize your $13,000 annual exclusion from gift taxes. Under this plan a married couple would be able to distribute up to $26,000 per beneficiary ($13,000 from each) per year tax-free, resulting in a reduction of the size of your estate. Used in conjunction with other estate planning techniques, such as family limited partnerships, grantor retained annuity trusts, or irrevocable life insurance trusts, this technique can be used to remove large and/or appreciating assets from your estate during your lifetimes with limited or no tax consequences.

Gifting of Appreciated Property.

For highly appreciated properties that you intend to sell, Charitable Remainder Trusts or Charitable Lead Trusts could be used to minimize the amount of capital gains taxes that would be due upon the sale of the assets. If used in conjunction with Wealth Replacement Trusts this technique could remove large appreciating assets from your estate, provide a guaranteed income for life, make a large donation to charity, and replace the value of the asset to be distributed to your heirs tax-free.

Charitable Gifting.

An effective estate tax reduction strategy is to gift or devise properties to qualified charities. Lifetime gifts to qualified Internal Revenue Code Section 501(c)(3) charities will generate a current deduction on your income tax return and will remove the gifted asset from your estate. Charitable devises made through your Living Trust will remove the property given to charity from your taxable estate upon the second death.

Irrevocable Life Insurance Trusts.

You could plan for estate taxes by beginning a gifting plan to an Irrevocable Insurance Trust. Utilizing your annual exclusion, you could gift funds to an Irrevocable Insurance Trust set for the benefit of your beneficiaries. The trustee could then use the gifted funds to purchase life insurance on your lives. Upon both of your deaths, the insurance policy proceeds would be distributed to the Irrevocable Insurance Trust free of estate and income taxes. The funds could then be used to purchase assets from your estate for the purpose of providing cash to pay for the estate taxes due. The balance of the proceeds and the assets purchased from your estate could then be distributed to your beneficiaries tax-free.


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