The Eleff Law Group

What Gifts Will You Give This Holiday Season?

The holiday season is upon us. For many, that means hitting the mall the day after Thanksgiving in search of the perfect gift. An often overlooked area for gifts? Your own estate.

Think of this as "strategic gifting." Not only will you be giving a loved-one a gift, but you may also reducing the size of your estate, avoiding or minimizing estate taxes, and ensuring your wealth is transferred to the next generation.

Under federal tax laws, you can gift up to $14,000 a year to another individual without incurring any gift tax. Gifts under $14,000 also don't count against your lifetime combined federal estate and gift tax exemption.

Want to give more? Spouses can each gift $14,000 for a total of $28,000 per recipient; gifts to your child and his or her spouse, from you and your spouse bring the exemption amount to $56,000 per year.

Have a particularly large gift in mind? Consider bunching the gift tax exemptions, by making a partial gift close to year-end and the balance right at the start of the new year.

Are you interested in sophisticated estate planning? Certain trusts can allow you to gift income-producing assets while retaining the income tax burden during your life, further reducing the size of your estate, and ultimately your estate taxes.

Make Sure Wealth Stays In The Family

If you have a large estate - over $5.5 million for an individual, or $11 million for spouses once the 2016 inflation reset is announced this January - lifetime gifting can be an important tax-reduction strategy. Transferring wealth out of your estate during your lifetime could potentially save hundreds of thousands of dollars in estate taxes. Further, that value can be greatly magnified when appreciation in the asset gifted grows outside of your estate.

Concerned About Asset Preservation?

Gifts don't always have to be cash per se. Consider stock, business interests, or real estate, such as vacation homes or legacy properties that may have been in families for generations.

If you end up needing Medicaid to pay for nursing home care later in life, you could lose these assets. One solution is to gift away assets during your life. You can give property to children or grandchildren in a different ways, such as by gift deed or by transferring the property into certain trusts. As long as the property is out of your estate at least five years before you need Medicaid assistance, it should escape the dreaded "five-year look-back penalties" for Medicaid qualification.

No Reason To Procrastinate

This year, consider giving a gift that has a real impact on your life and the life of your loved-ones. The best part? No shopping required; you don't have to look any further than your own estate.

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