There are many strategies you can follow to reduce estate tax, with gift giving one of the best. While this sounds easy enough, there is more to it than meets the eye. This is particularly true because there are laws that govern what you can and cannot do.
Here are a few details to keep in mind:
— Annual gift exclusion. With an annual gift exclusion in place, you are only able to gift so much to a single individual in a given tax year. This changes from time to time, so check with your tax professional on what you are permitted to do.
— Gifts to spouses. If you are a citizen of the United States and married, there is no limit on the value of a gift that you can give your spouse.
— Gifts of non-cash property. Many people believe that the annual gift tax exemption rule only applies to cash, but this is not true. It also applies to personal property, stocks, bonds, and many types of real property.
— Gifts to minor children. If you plan on making a gift to a child under the age of 18, make sure you have a system in place for him or her to manage the funds.
There is no denying the fact that you can reduce estate tax through gift giving. This is a strategy to consider if you are looking to do something you can enjoy today, while also benefiting your family in the future. As long as you know the law and your rights, you can do this without risk.
Source: FindLaw, “Reducing Estate Tax – Gifts,” accessed May 20, 2016