Estate Planning: Gifting

Estate Planning: Gifting
by Takara Alexis

If you're like most Americans, you like to give gifts nearly as much as you like to receive them. Luckily, if you're serious about estate planning there is a helpful technique called gifting that can potentially save your family, friends and heirs a lot of cash on estate taxes in the future.

Gifting is exactly what it sounds like: a gift. It's a gift that can be given to a spouse, a family member or a friend. It's a technique that has been used commonly by people to reduce the value of their estate and can be done in different ways.

Every person in the U.S. can give assets or property of up to $12,000 a year. That amount applies to each individual they gift to. This gift can be given to pretty much anyone without paying any gift taxes, as long as the amount gifted stays under the limit. You are able to give gifts, tax-free, to as many people as you wish. You can also gift an unlimited amount of property to charity and your spouse.

By law, you can gift a spouse unlimited amounts of property each year without paying any taxes. This isn't something that is suggested however, because it just moves the larger estate burden onto your spouse. One helpful technique is to team up with your spouse and gift to specific individuals, such as children and grandchildren. When you and a spouse get together and gift, which the IRS has termed "gift splitting," you can give up to $24,000 to each individual without paying any gift tax. This allows you to quickly reduce your estate by a large amount.

Gifting is also a really good way to give assets to your family that will end up appreciating in value. That way, you not only reduce the amount that may be taxed in your estate, but you lower the amount that your asset would have grown to by the time you passed away.

While estate planning is often put off because of the uncomfortable topic of death, it may be one of the most important financial planning tools available. It might also be one of the most crucial ways to save your family from heartache. In the end, gifting allows you to take advantage of tax savings and choose the way you want to be remembered, which is truly a gift that will keep on giving.