Estate and Gift Planning

You cannot take your money with you after you pass on, but that does not mean it should go to the government. If you neglect to properly plan for your estate, that is exactly what can happen. Instead of your intended heirs, the government could receive the bulk of an estate that took you many years and countless hours of labor to achieve. This could result in much financial hardship for your loved ones; and even if that is not the case, your estate should still go to the people or entities that you choose.

Regardless of what the current tax laws might be at any given time, a little planning could save you thousands of dollars. You may also be surprised by how much your estate is actually worth. To determine this, add the value of your assets in their entirety. Remember that life insurance might also fall under the umbrella of your estate. If the total exceeds the exemption value, you need to research how a few simple planning techniques can benefit your family when it is time to settle your estate. Also, effective estate planning strategies may significantly reduce your present income tax bill.

Use this estate planning calculator as an aid in establishing the value of your estate (click here).

Consider the following possibilities for estate planning:

  • Gifting: The tax laws may enable you to gift a specific amount annually. You might do this for as many recipients as you wish. Whether or not he or she owns the transferred asset, your spouse may also participate in this act of gifting. Thus, you might transfer twice the exemption allowance every year, and you could do so for each one of your heirs. If you wish to double the yearly exclusion even further, you could include your children’s spouses in this gifting. This is because an individual who receives the gift need not be a blood relation to you. Note that such gifts will not decrease your particular estate tax exclusion.
  • Unlimited Gifts: You may also offer unlimited monetary gifts that pay for someone’s school tuition or medical expenses. However, you can only do this under the condition that the payments you make go directly to the relevant institution. Applying this strategy can be an excellent way to help a loved one, while still ensuring that the money you donate will be utilized as intended.
  • Transfer of Property: If you own property that you will not need for your retirement, you might consider transferring it while you are still alive. If the property produces a sizable amount of income, future income would be taxed to its new owner instead of to you. The property would no longer be included in your estate.
  • Spousal Transfer: There is generally no limit to the number of transfers that you can make to your spouse. In fact, you may do this via your estate, as well as during the course of your lifetime. No matter what amount they might be, spousal transfers do not incur taxes. However, it may not be in your best interest (or your spouse’s) to leave everything to your spouse. Doing this means that you are not making use of the lifetime exclusion amount that would otherwise be applied to the estate of the first spouse who dies. Proper strategizing will instead enable you to apply the exclusion to both estates. That means you will have the capacity to transfer double the original amount to your heirs, and the transferred amount will be free of estate tax.
  • Life Insurance Proceeds: When planned correctly, certain life insurance proceeds may be kept apart from your estate. If the policy is left to a designated beneficiary, the proceeds will then go to that beneficiary instead of to the estate.

Planning your estate can be a complex process, and you should do everything you can to ensure that your assets go to the individuals or entities that you wish. Do not attempt to approach this task without assistance. Contact us today, so the Brumfield team can make sure that your wishes for your estate are carried out properly.