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Gifting as Part of an Estate Plan

Estate planning involves more than just distributing assets after death. If you are looking to reduce your estate value below the taxable limit, you may consider gifting as an option. Here’s a look at estate taxes and how you can use gifting as part of an estate plan.

Estate Tax Thresholds

The federal estate tax threshold was just increased to $11.2 million per person, or $22.4 per couple. This will remain in place until 2024. The Massachusetts estate tax exemption is much lower, at just $1 million. The tax percentage is a progressive one that may go as high as 16%. For this reason, many look into reducing the value of their estate below the $1 million threshold.

Tax Free Gifts

Legally, you may gift $15,000 a year per person, tax-free. If you are married, both you and your spouse can gift that amount to the same person. As part of your estate plan, you may decide to gift money to your children, grand children, etc. Doing so reduces the assets in your estate. The recipients are also not taxed on the amounts received. This can be helpful if you are planning on funds going to those family members anyway, upon your death.

Imagine this scenario:

Your estate is worth $1.1 million. You have 3 children and 5 grandchildren. Within the year, you gift each of them the maximum $15,000. That totals $120,000. This brings your estate value down to $980,000. You are now below the threshold and will avoid paying both Massachusetts and federal estate taxes.

Charitable Donations

Another gifting option is through charitable donations. Unlike cash gifts to individuals, there is no limit to the amount that you can give to charity. You may be as generous as you wish!

Other Estate Planning Strategies

The downside to giving money away is that you no longer control the funds that you have given away. If you experience an unexpected illness or live longer than expected, you may find yourself in need of those gifted funds. There are other estate planning instruments, such as trusts, that can help you avoid estate taxes while keeping the funds under your control. We discuss gifting here only as one of many options. It’s best to consult with an estate planning attorney to develop a plan that best fits your needs and protects your interests. Call Martino Law Group to schedule a consultation.

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Attorney John J. Martino offers a broad range of legal services in Eastern MA and Southern NH. As a highly dedicated and experienced professional, he handles cases under the following areas of practice:

Estate Planning

Family Law and Divorce

Real Estate Law

Probate Proceedings

Business Law

Personal Injury

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