How Gifting Of Assets Is Beneficial In Estate Planning
If you are retired and have a lot of assets, now is the time for you to start preparing your estate. With the right plan, you may be able to help your kids avoid having to pay a lot of money for inheritance taxes, and one of the ways to do this is by gifting your assets to them.
What is gifting of assets?
Gifting of assets refers to the process that occurs when one person gives another person a large asset. This could be a gift of money, land, or anything else of value. As long as guidelines are met, there are no taxes involved with gifting of assets.
You can use this tactic to reduce the assets you have so that they do not have to be transferred after you pass away.
Is there a limit of how much you can gift?
According to the Internal Revenue Service (IRS), the limit on the amount you can gift in 2015 is $14,000. This amount tends to change every few couple years, but it did not change from 2014 to 2015. What this means is that you can give $14,000 in assets to someone each year without paying taxes. You will not pay taxes, nor will the recipient.
You should also realize that you are legally allowed to give up to $14,000 to as many people as you would like each year, without incurring any tax consequences. In other words, if you have five children, you could legally give each of them this amount each year without having any tax issues from it.
Is this option better than using an estate?
If you decide to set up an estate that will be divided between your kids when you die, there are ways to reduce the taxes they will pay. The problem is that it often takes time to settle an estate. Because of this, your kids may have to wait months to receive their inheritances, and it could take even longer if anyone objects to the estate.
By gifting your assets away little by little, you can make sure that each of your children receives the inheritance they are supposed to receive, and you will get to watch them enjoy these gifts. It's also important to realize that gifting of assets is a common step in estate planning.
If you would like to learn more about estates and gifting of assets, contact an attorney today that specializes in estate planning, like the ones at Price & Associates.