Would you rather that your loved ones receive their fair share of your estate when you die — or do you want to hand over your assets to the tax man? That is the burdensome question that many seek to answer when they enlist the help of an estate administration professional. Tax rules are not always easy to understand, especially as they pertain to estate planning and annual gifting.
Many Michigan residents may not realize that the gifts they give to their heirs while they are still alive may have an impact on their estate plan. For example, residents can only give $13,000 per recipient — or $26,000 per married recipient — during any single calendar year without being subject to gift tax penalty payments. This amount is generally revised by legislators from year to year, so estate planning can become even more complicated. Further, the law allows residents to give a total of $1 million over their lifetimes in cumulative excess gifts, but those gifts will lessen the amount of property that can pass penalty-free to your heirs after your death.
So, what types of gifts generally fall under this type of exclusion? Experts say that the vast majority of gifts originate from parents who want to transfer assets to their children. Those assets include corporate interests and stock, money and other financial assets. Also, many older benefactors may want to lessen the value of their estate in their twilight years to prevent medical and nursing-home bills from ravishing their life savings.
No matter the reason for the transfer, gifting money needs to be done strategically and with care. Realize, for example, that transferring an asset means that you lose all control over it; the recipient is now entitled to all benefits and decision-making power associated with that asset. By taking appropriate measures to ensure that your tax planning is thorough and well-thought-out, you can protect your assets and promote your family’s success for generations to come.