How can gifts play a role in estate planning?

On behalf of Scaringi Law posted in Estate Planning on Friday, April 3, 2015.

Although the estate tax exemption may be high enough for many clients to pass their assets free of estate tax, estate planning is about much more than tax avoidance.

Specifically, estate planning can raise questions regarding whom, what and when an individual may wish to transfer certain assets to designated recipients. Our law firm focuses on wills, trusts and other legal instruments that can help an individual maximize financial assets during his or her lifetime and minimize the chance of family conflict over inheritance disputes in the future.

For example, an individual might want to provide for a surviving spouse for the rest of that spouse's lifetime, with assets thereafter passing to children. A trust could be set up to accomplish this goal, paying for the surviving spouse's expenses and perhaps distributing the trust principal to children or other heirs after the surviving spouse's passing.

For high asset estates or those with a family business, a family limited partnership may be a good option. Transferring a business to a family limited partnership removes it from the owner's estate, while still allowing the owner to retain some control over it. Assets are transferred into the partnership in exchange for partnership shares. The owner generally keeps the general partner shares, and limited partnership shares can be gifted to children over time, usually in increments under the annual gift tax ceiling. In 2015, that ceiling is $14,000. Although the lifetime gift tax exemption also sets a cap upon the total amount a person can gift away without incurring federal gift tax, this may not be an obstacle in many family partnership situations. Check out our law firm's website on estate planning to see just a few of the many options that are available.

Source: Internal Revenue Service, "Chapter 11 - Family Partnerships (12-2002)," copyright 2014, Internal Revenue Service


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