When people start estate planning, they often begin with the basics: a will and possibly a trust. However, with these estate planning vehicles, your loved ones do not receive their inheritance until after you have died. Some Californians want live to see their loved ones enjoy their inheritance. For these people, gifting may be an overlooked estate planning option worth considering, especially when it comes to taxes.
First, it is important to note that federal law provides an estate and gift tax exemption. A single individual can have up to $11.58 million in assets and a married couple can have up to $23.16 million in assets before their estates are subject to the federal estate tax. Keep in mind that some states have their own estate and gift tax exemptions, which could differ from federal laws.
That being said, annual gifting of up to $15,000 per individual will not count against the aforementioned estate tax exemption. A person, even if they are married, can give up to $15,000 to as many people as they wish each year, and these gifts will not be counted for estate tax purposes.
Gifting is a sometimes-overlooked estate planning option, but it is one that some people find attractive. If a person has a significant amount of assets, gifting can be a means of passing on these assets to their loved ones while avoiding the federal estate tax. Moreover, there is the emotional satisfaction of seeing your loved ones enjoy the gift. Those who want to learn more about the legal aspects of gifting will want to seek the professional advice needed to better understand their options.