Estate Planning - Will, Gifting and Gifting Taxes Part 1

Where there is a will, there is a way. Estate planning is essential to completing your financial plan. Estate planning protects your assets and allows you to decide how those assets should be distributed upon your death.

Giving it away only becomes an option if you have more of it than you need. If you only knew exactly when you were going to die, I could help you do some exceptional planning. You could give it all away, and your heirs would have to sell your car to pay for the funeral.

Certainly, after figuring your net worth and adding in your insurance proceeds, if you find than your estate is $1.1 million, you may want to consider gifting as a way to pare down your estate---but only if you can tell me your aren't going to need the money. Aging and dying can bankrupt an individual, and I believe you should hang on to it if you think you might need it.

The unified credit allows us to give away the exempt amount during our lifetime or upon our death without paying a gift/estate tax on it. Gifting this away when you are alive gives you the ability to see just where the money goes and the good it can do. If it is in the form of a contribution, it becomes a deduction, and you don't need to worry about using your unified credit exemption.

You also have the ability to use the $10,000 annual exclusion for gifting. This number will be indexed in the future. You can make a number of unlimited annual gifts of $10,000 maximum in the form of cash or property, free of the gift tax to as many recipients as you wish or have funds to provide for. These gifts are free of taxes to the recipients upon receipt of the gift, but if the asset creates income, there could be income taxes due. If you are married and your spouse joins in, you could give away $20,000 to each recipient.