Need a push to give to the next generation sooner rather than later? In many cases it makes sense to give your loved ones part of their inheritance when they may value it the most – while you are still here to give it to them. Giving the annual exclusion can move significant amounts of money from inside your estate to your beneficiaries outside your estate. Below is a crude example showing the power of this simple planning idea:
John & Jane have 3 married children and 9 grandchildren:
Gifts to children/spouses per year: $180,000 ($15,000/person * 2 (John & Jane) * 2 (child and spouse) * 3 sets of children)
Gifts to grandchildren: $270,000 ($15,000/person * 2 (John & Jane)
Over 20 years, assuming no change in the annual exclusion amounts, this moves $9,000,000 from inside John & Jane’s estate to outside their estate. Assuming estate taxes are 40%, this saves $3,600,000 in taxes. It also gives children/grandchildren funds much earlier, allowing the gifts to be acknowledged, discussed, and put to use during one’s lifetime.
For more information on gift taxes, visit the IRS page here or connect with a member of our Hill Investment Group team to discuss.