Giving away assets during your life will help reduce the size of
your taxable estate, which is beneficial if you have a large estate that could
be subject to estate taxes. For 2016, the lifetime gift and estate tax
exemption is $5.45 million (twice that for married couples with proper estate
planning strategies in place).
Even if your estate tax isn’t large enough for estate taxes to
be a concern, there are income tax consequences to consider. Plus it’s possible
the estate tax exemption could be reduced or your wealth could increase significantly
in the future, and estate taxes could become a concern.
That’s why, no matter your current net worth, it’s important to
choose gifts wisely. Consider both estate and income tax consequences and the
economic aspects of any gifts you’d like to make.
Here are three strategies for tax-smart giving:
1. To minimize estate
tax, gift property with the greatest future appreciation potential. You’ll
remove that future appreciation from your taxable estate.
2. To minimize your beneficiary’s
income tax, gift property that hasn’t appreciated
significantly while you’ve owned it. The beneficiary can sell
the property at a minimal income tax cost.
3. To minimize your own
income tax, don’t gift property that’s declined in
value. Instead, consider selling the property so you can take the tax
loss. You can then gift the sale proceeds.
For more ideas on tax-smart giving strategies, contact us.
© 2016
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