Smart Gifting in Estate Planning

Smart gifting in estate planning isn’t just about generosity, it is one of the most overlooked strategies that can benefit your estate plan. If done properly, utilizing gifting in your estate plan can reduce your estate’s tax exposure, protect your assets, and allow you to provide support and security to your family. However, it would be a mistake to just start cutting checks to your loved ones. Proper gifting in the form of estate planning relies on timing, structure, and compliance to various legal requirements. This blog will begin a conversation about how you might benefit from utilizing gifting in estate planning.

While this article will go over some great, general information that all estate planners should know; this is far from the nuanced, formal legal guidance that you and your estate plan deserve to ensure that your own complex estate is properly managed. For expert legal advice tailored to your own circumstances, contact the esteemed wills & probate attorneys at Suncoast Civil Law.

What Is Smart Gifting?

When people think about estate planning, thoughts typically originate surrounding wills and trusts. While these are both powerful tools, gifting can be equally powerful. Unlike an inheritance, which benefits your loved ones after you are gone, gifting empowers you to take action while you are still alive. This allows you to take immediate action to help your family, and your beneficiaries reap benefits right away.

In the simplest of terms, gifting is giving somebody else something of value, such as an asset, money, or property, without receiving anything in return. Gifting in estate planning is an intentional piece of a larger estate planning strategy.

Some common examples of strategic gifts can include annual cash gifts (under a certain threshold), direct payments to hospitals (which are not taxable gifts), early inheritance transfers that reduce your estate size, gifting property into irrevocable trusts, and contributions to 529 college savings plans, which offer tax advantages.

Tax Advantages

While the number is prone to change, the IRS does allow anyone to gift up to a certain amount to as many individuals as they want without filing for gift taxes. This can be a powerful way to gradually reduce the size of your estate, and thereby potentially avoid certain tax thresholds that would require higher taxes on your estate.

Florida Advantage: Florida currently has no state gift tax or estate tax. This means that all planning focuses on federal thresholds, another reason Florida residents are in a unique position to benefit from smart gifting.

Gifting and Medicaid Recovery

With the right planning, you can protect large assets, such as the family home, from being lost to long-term elder care costs or Medicaid estate recovery.

For example, many Florida families choose to transfer the family home into an irrevocable trust years in advance of applying for Medicaid. If the transfer is done more than five years before care is needed, then the transfer won’t count against Medicaid eligibility. This can allow homes to stay in the family that would otherwise likely be sold to pay for care.

By planning early, you give yourself options. It is important to understand the legal repercussions of any significant move you make  in estate planning, to include placing a home or other large asset in an irrevocable trust. An experienced wills & probate attorney can help you review your estate and your options.

Contact Suncoast Civil Law

There are many considerations in gifting and estate planning. Contact an experienced Sarasota wills & probate attorney at Suncoast Civil Law to discuss your own circumstances and begin working with our team today.

Sources:

grainger.illinois.edu/news/stories/holonyak-gift

fidelity.com/learning-center/wealth-management-insights/tax-benefits-of-lifetime-gifting