Santa Cruz Estate Planning Attorney

Value of Gifts to Estate Planning

Gifts offer a valuable tool in estate planning, but if not used carefully they can cause as many problems as they solve. The primary use of gifts is to manage the value of your estate to avoid estate taxes. Although there is no federal estate tax right now for 2010 it may be implemented before the years end and it is scheduled to return in 2011. So it is important to understand how you can use gifts to avoid what may be as high as a 55% tax rate.

An estate is only subject to estate taxes if its value is above the minimum amount set for the year. In 2009 this amount was 3.5 million dollars and if nothing changes the amount will be 1 million dollars for 2011. You may use gifts to make sure the value of your estate is below the set amount. To do this an estate planning attorney can help you into account the current exemption amount and any appreciation gained by your property.

Even though gifts may be beneficial it is important to understand the potential pitfalls. A few possible issues to watch for may include:

  • Gift may triggering other taxes
  • Gift may alter recipient's status for current support
  • Loss of property to you may affect your stability

Using gifts to avoid estate taxes may have other tax implications. It is important to make sure your gift falls within one of the exceptions to the federal gift tax. Also it is important to understand giving a gift that has appreciated in value may leave the recipient paying capital gains taxes. If the purpose of your gift is to avoid taxes then it is important to look understand the big picture and all the potential tax implications.

Another concern is to understand how a gift can affect the recipients eligibility for financial and medical assistance. A gift may cause a students to lose financial aid, a person with special needs to lose financial and medical assistance, or a person classified as low income to lose benefits such as Medicare. A gift may be given with the best intentions, but without proper planning it may actually cause more harm than help.

Lastly I would urge you to understand the affect giving a gift may have on you. You may be giving away property that ensures your financial security. In addition you will surrender control of property that may have sentimental value. A gift to a child may seem like a natural way to honor it's sentimental value, but there is no guarantee the property will not be sold or re-gifted later. It is important to understand when you give a gift you are giving up control of the property.

Helping my clients manage the size of their estate and using gifts to do so is common practice for estate planning attorneys. However it is also important for you understand all of the affects that may arise when gifting property

DISCLAIMER: This article is meant only to provide information and is not intended as legal advice. If you have questions concerning your particular case you should make an appointment to talk to an attorney or mediator about your options. I would love to hear what other estate planning or familily law issues you find important.

by Keith Dysart, Santa Cruz Estate Planning Attorney and Mediator


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