Estate & Gift Planning

Regarding estates and gifts, it’s important to remember that a little planning can save thousands of dollars. In fact, failing to plan for your estate can mean that the government, rather than your heirs, may take the major portion of your hard-earned money. Despite recent changes in the tax law, the top federal estate tax rate is still 48 percent. In addition, most states still impose an estate tax.

You may be aware the current lifetime exclusion is $1,500,000. The exclusion is scheduled to increase to $2,000,000 in 2006 and $3,500,000 in 2009. The exclusion in 2010 and subsequent years is currently undefined in the tax law. You may be surprised what your estate is worth. Add up the value of all your assets. Don't forget life insurance which may fall under your estate. If your total value exceeds the exclusion, you should employ a few simple planning techniques which could save your family at estate time.

In addition, there are some very effective estate-planning strategies that can also cut your current income tax bill.

Among them:

  • Current tax law allows you to give away $11,000 per year per recipient. Your spouse may join in the gift even if he or she isn’t an owner in the transferred asset. This means that you could transfer up to $22,000 per year to each of your heirs. To double the annual exclusion yet again, you may want to include spouses of your children. The person receiving the gift does not need to be related to you. These annual gifts do not reduce your once-in-a-lifetime exclusion.
  • If you have property which isn’t necessary for your retirement, maybe it’s a candidate for transferring during your lifetime. If it’s a large income-producer, the future income will be taxed to the new owner and not to you, plus the property will be out of your estate.
  • You can make unlimited transfers to your spouse either during your lifetime or through your estate. There are no taxes on spousal transfers, regardless of size. But leaving everything to your spouse may not be a good idea, since doing so fails to utilize the lifetime exclusion amount in the estate of the first spouse to die. Planning will enable you to use the exclusion in both estates, and you'll be able to transfer twice as much to your heirs free of estate tax.
  • With proper planning, certain life insurance proceeds can be kept out of your estate.

Estate-planning questions that frequently surface include how much you actually need for retirement, and what property, if any, should you consider parting with during your lifetime?

It’s advisable to remember that estate and gift planning are very personal processes. Each family plan is unique. Effective planning should involve you, your accountant, your attorney, and in many cases, an insurance agent and trust officer.

Please call us at W&G for an initial conference at no charge. We’ll be happy to help you assess your need for estate and gift planning.