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Positives of Making Lifetime Gifts

By Howard C. Stross
November 17, 2014

The season of giving is approaching. As part of your year-end planning, you may be considering making some significant gifts. You should consider the consequences of making lifetime gifts now versus your beneficiaries receiving gifts after you have passed away. This is the first article in a two part series. This article will discuss the positives of making lifetime gifts and the next article will explore the concerns associated with gifting.

The Joy of Giving

First and foremost, if you make lifetime gifts to your beneficiaries, you get to experience the joy of seeing your beneficiaries use the funds now. It can be wonderful to give a car to your child, fund their education, or help them with a down payment to purchase their first home. A grandmother may enjoy the experience of shopping with her granddaughter and buy her prom dress. Your beneficiaries may observe your generosity and in turn be generous with their money as well.

Avoiding Estate Taxes

Federal estate taxes are not a concern for the vast majority of Americans. In 2014 the federal estate tax exemption is $5,340,000 for a single person and married couples can double that amount with the proper planning. In 2015, this is scheduled to increase to $5,430,000 per person.

If your estate is near or over the federal estate tax exemption, you can make lifetime gifts in order to decrease or possibly avoid federal estate taxes. In 2014, you may gift up to $14,000 per person per calendar year. If you have five children, you could gift away $70,000 per year which over time could bring you under the federal estate tax exemption.

In addition to the $14,000, you may also may lifetime gifts in an unlimited amount for medical or education expenses so long as they are paid directly to the provider. For example, tuition must be paid directly to the college. By being generous now, you may avoid estate taxes in the future.

Avoiding Probate

Avoiding probate is the reason most people give for wanting to transfer their home to their children now. This can accomplish the goal of avoiding probate. However, there are serious consequences for gifting your house to your children now (or even just adding them to the deed). By doing so, you can cause a chain reaction where you may be required file a federal gift tax return and you may have disqualified yourself from qualifying for Medicaid. If someone else owns all or part of your home, they are needed to refinance, mortgage or sell the property. In addition, if you don’t own your home anymore, property taxes will likely increase because you will lose your homestead tax exemption, senior tax exemption, and widow’s tax exemption.

This article is for general information only and is not intended to provide tax, accounting or legal advice. If you are considering making major lifetime gifts, especially adding another person to the title of your property, you should consult with an attorney. Call us at 813-852-6500 to schedule a free consultation.

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