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Business Succession &
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The Law Offices of Kennedy & Jackson
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A common misperception is that estate tax exposure can be minimized by transferring wealth among family members or friends — making annual or one-time gifts of cash or other assets to decrease the size of your estate and thus decrease the amount of estate tax that will have to be paid after death.
However, before making large gifts to family members or friends, it is important to understand the federal gift tax laws and how your gifts may have a negative impact on your estate plan as a whole.
GIFT TAX PLANNING TO MINIMIZE TAX CONSEQUENCES
Federal tax law allows individuals and spouses to make gifts of a certain amount each year, and over a lifetime, without incurring a gift tax. This amount, which is excluded from the gift tax, changes every year as the amount is adjusted for inflation. Currently, the annual exclusion is $12,000 per person. Currently, the lifetime exemption is $1 million over one’s life. However, this exemption is subtracted from the estate tax exemption. Therefore, if you give $500,000 over your lifetime, these amounts will be excluded from gift taxes. However, this amount of money will be subtracted from your estate tax exemption. This means that only $1.5 million of your estate will be exempt from the estate tax in 2008, and $3 million of your estate will be exempt in 2009.
Using gift planning to minimize tax exposure serves a serious purpose. Without careful gift tax planning, the potential negative consequences include the possibility of miscalculating the level of estate tax on your assets after death. This may, in turn, have an unintended negative impact on your intended heirs, if they have made financial plans based on an expected bequest.
It is crucial to make sure that advice from a financial planner or life insurance agent does not contradict your estate planning desires. For instance, if you have a beneficiary designation on a bank account, certificate of deposit, IRA, life insurance policy or other financial account, that beneficiary designation will override any designations you make in your will. We welcome the input of these professionals in the planning process in order to make sure that your estate plan complies with your wishes.
OBTAIN SOPHISTICATED GIFT TAX PLANNING ADVICE
At The Law Offices of Kennedy & Jackson, located in Houston, Texas, our attorneys have decades of experience building and maintaining strong estate plans that minimize exposure to gift and estate taxes. Both of our estate planning lawyers are board-certified by the Texas Board of Legal Specialization.
CONTACT THE LAW OFFICES OF KENNEDY & JACKSON
Our law office is located in the Galleria area of Houston, with free on-site parking available next to our office building. We provide a complimentary — and confidential — initial consultation to all new potential clients.
To schedule an appointment with one of our lawyers, call 713-783-7444 or send us an email.