The Annual Gift Tax Exclusion Can Shed Some Holiday Cheer on Your Estate Planning Process
When your children were little, the holidays were a time of unbridled excitement. What could be more fun than watching your children discover previously unseen details in the holiday décor, tear open the wrapping paper on their presents, and stuff their faces with candy canes and gingerbread cookies? Now that they are adults, the conversations at holiday gatherings tend to center on money and taxes, and if you ask your kids what they want as gifts, they will probably tell you, “nothing,” and they might mean it. Your kids might also be uncomfortable listening to you talk about your financial plans, as much as you are eager to discuss them, because once you get to a certain age, financial planning means estate planning, and estate planning means mortality. For this reason and so many others, the annual gift tax exclusion is the perfect way to frame conversations about estate planning in the context of money-saving cheer. The annual gift tax exclusion is just one way to reduce the taxes you will pay in retirement and the taxes your heirs will pay on your estate. To discuss other ways you and your descendants can save money, contact an Orlando gift and estate tax planning lawyer.
Tax-Free Ways to Help Your Children and Grandchildren Financially
You and your children might not see eye to eye on everything, but you can agree that the IRS is your common enemy. Large amounts of money given as gifts to individuals (as opposed to charitable donations) are taxable. In 2020, the largest amount of money you can give to another person, such that neither you nor the recipient pays taxes on it is $15,000; this is the annual gift tax exclusion. You can give cash gifts of $15,000 or less to as many people as you choose, tax free, as long as you do not exceed a lifetime limit of $11 million in cash gifts.
There is a good chance that your family members will use the money to pay medical bills, or else to pay school or college tuition for themselves or their children. The even better news is that, if you pay directly for your family members’ medical or educational expenses, that is also tax free, and the amount does not count toward the annual gift-tax exclusion. Therefore, if you choose to pay the portion of your grandson’s tuition that is not covered by scholarships, so that he will not have to take out student loans, that money is not taxable. It also does not count against the amount of money you can give him as a tax-free gift.
The best news of all is that “now everyone can save money on taxes” is the most cheerful possible way to talk to your family about estate planning. They always tell you that they would rather have your presence than get money from you. With the annual gift tax exclusion, they can have both.
Let Us Help You Today
The Orlando estate planning lawyers at Gierach and Gierach will help you develop an estate plan with which you can enjoy your retirement and feel confident about your descendants’ financial security. Contact Gierach and Gierach, P.A. for help today.