How To Avoid A Gift Tax

How To Avoid A Gift TaxAccording to CNN Money Magazine, “estate planning isn’t just about how you want your assets distributed after you die.” Figuring out what to do with your estate is just that—and while the word “estate” may bring to mind brick mansions and vacation homes, the truth is that most people, of any socioeconomic class, have an estate and will need to consider what to do with it once they’re gone. An estate can include pension plans, retirement funds, and family heirlooms—which are pretty common. Estate plans can also be a way to posthumously settle family debates and describe your wishes and plan for your funeral.

And yet the estate tax is a daunting, looming penalty that makes some people think twice about worrying about an estate plan at all—no one wants to leave their children straddled with a new tax burden. Some people think that using a will allows their heirs to escape estate taxes, but according to FindLaw.com, “instead of trying to use a will to avoid the often heavy estate taxes, explore different types of trusts that may work for your situation.” The other alternative, according to CNN Money Magazine, is to leave your heirs money while you’re still alive. This, according to CNN, “allows you to reduce your taxable estate and provide advance help to your beneficiaries.”

To avoid having to pay taxes on the gifts that you give, consider the two easiest gift tax-exempt forms of giving, according to CNN Money:

  • medical or educational expenses are exempt from taxes and you can give an unlimited amount for these purposes, provided that the money is given “directly to the institutions where the expenses were incurred.”
  • up to $14,000 cash or assets to any number of people is exempt from gift tax

If you decide to gift cash, according to CNN, you “must file a gift-tax return and the excess amount will be applied toward your unified lifetime gift and estate tax exclusion.” That exclusion, according to The New York Times, changed in April of this year to $5.25 million, or $10.5 million for a couple.

If you or someone you know is ready to begin estate planning, don’t go through it alone. Contact a dedicated Illinois estate planning attorney today.

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