Los Angeles Estate Planned Gifts Attorney: Robert Hoffman

Los Angeles Planned Gifts Attorney

The principal goal at the heart of every comprehensive estate plan is to avoid the unnecessary imposition of estate and income taxes. While most estate plans contemplate transfers after the death of a client, there are situations in which transfers during life (also or inter vivos gifts) offer superior results.

The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Understanding these exceptions and planning wisely can help you maximize the amounts you can transfer without paying tax. Generally, the following gifts are not taxable gifts:

  1. Gifts that are not more than the annual exclusion for the calendar year.
  2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
  3. Gifts to your spouse.
  4. Gifts to a political organization for its use.

In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made. The annual gift exclusion is an amount determined by the IRS and is currently set for $14,000 in 2014. This means that a donor can give up to $14,000 to a donee with no gift tax implications to the donor and no income tax implications to the recipient.

The following describes, in general, commonly used exceptions to the gift tax rules. But, careful analysis by an experienced attorney of how these rules apply to your particular finances and circumstances is the first step. To start exploring how strategic and forward-thinking estate planning can maximize the amounts transferred to your loved ones and other concerns, call Los Angeles planed gifts lawyer Robert Hoffman at (800) 897-3915 today.

Tax Benefits for Married Couples

One of the most elementary aspects of gift tax planning is that married couples throughout the country can double the total gift exemption by combining their allowed exclusions. In other words, a married couples can combine their gift exemptions to transfer money, assets or other property to another and still incur no tax liability. Over a number of years, this can allow the couple to transfer significant amount of wealth without incurring any gift tax.

For example, let’s say a married couple in Los Angeles has one child. Because the married couple can combine their $14,000 individual exclusions, tax regulations permit the couple to give a combined $28,000 to their child, another combined $28,0000 to their child’s child — their grandchild. If the beneficiary of the gift is a minor, the couple might look into establishing a trust for them, which names the minor as the beneficiary. Going this route allows the donor to control how and when their grandchild (or other minor) receives funds from the account. If the child is a minor, forming a trust can be an important aspect of protecting your goals and your legacy. If nothing else, even this relatively simple example illustrates the multiple layers of consideration that are present when crafting an estate plan.

The Consequences of a Gift Tax Error

If an individual or couple exceeds the annual maximum gift limit (exclusion), there can be varying degrees of consequences. If you give over the allowed limit for the year, which as of 2014 is $14,000 for unmarried persons and $28,000 for married couples, the total amount of the gift is applied against your lifetime gift exclusion, which is currently set at $5.34 million. Additionally, the person who received the gift will probably need to file a gift tax return using IRS Form 709, which will require them to use the IRS’ gift tax credit. Once a person exceeds their lifetime gift exemption, future gifts could be subject to a federal tax of up to 40 percent. The IRS can pursue both the donor and gift recipients to recoup the money owed, which is why it’s important to consult a tax lawyer when dealing with high dollar amount gifts.Working with an experienced and strategic tax attorney can assist you in structuring your transactions so that you can maximize the benefits of the the gift tax exemption and other tax benefits.

Trust an Experienced Tax Lawyer

As the multiple exceptions to when a gift is subject to tax suggest, there are a wide variety of alternative options available depending on your individual goals and needs. Other gift tax minimization strategies could  include charitable transfers (whether through a gift, charitable remainder trust, charitable lead trust, or a private foundation), IRC § 529 College Savings accounts for children and grandchildren, and many other strategies that should be reviewed in detail when establishing a comprehensive estate plan.

If you are beginning to consider how to transfer your wealth to the next generation, the advice of an  attorney who is well-versed in estate planning can be essential. We can discuss an array of estate planning tools, including planned gifts, to develop an estate plan that addresses your concerns and goals. To schedule a confidential and complimentary initial consultation with a dedicated and meticulous estate planning attorney call (800) 897-3915 or contact us online today.