While you are planning what to do with your assets after you are gone, it is understandable that you might wish to give gifts to your loved ones while you are alive so you can enjoy seeing them happy. You might also be concerned about leaving your heirs with a tax burden after your death if you have a sizeable estate. At the Bingham Legal Group PC, we are prepared to answer the questions of Detroit residents who want to know about estate tax and gift tax. Is there a way you can award your family members monetary gifts from your estate while you are alive, tax-free?
According to Charles Schwab, you have the right to give a certain monetary amount to anyone you want on a yearly basis without being taxed. One person can give $14,000 each to one or more people every year tax-free. If you are married, you and your spouse can combine your gift to give someone as much as $28,000. This is an effective way to help a grandchild with college tuition, to give a child money for a down payment on a house or car, or to assist a family member through a financially challenging time.
There is another benefit to giving tax-free gifts, in addition to being able to see the positive effects your generosity has on your loved ones. Currently, the lifetime estate federal tax exemption covers estates up to $5.45 million. Most people will not be subject to the federal estate tax; however, if your estate is quite large, gifting to your heirs while you are still alive may protect the remainder of your estate from being taxed after your death and leaving your relatives with less. If gifting to your loved ones is an option you choose, you will need to make sure you hold onto enough of your estate to live on.
You may learn more about methods of transferring your wealth to your beneficiaries by visiting our estate planning page.