Rather than brave the crowds and agonize over finding the perfect presents this year, why don’t you reserve this holiday season for making large gifts that lower your taxable estate instead?
Thanks to the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, you can still make gifts up to $13,000 (or $26,000 for married couples) completely tax-free this year.
And, if you’re feeling really merry this holiday season, the legislation also allows for a lifetime gift exemption up to $5 million dollars for 2011 and 2012. That means you can give up to $5 million in your lifetime without getting hit with a bill from Uncle Sam.
So for example, let’s say you want to make a gift to your grandchild in the amount of $100,000 to cover future college expenses. $87,000 of that will be considered a taxable gift ($100,000-$13,000 tax-free), which you will need to report to the IRS. However, you won’t get a tax bill on that either, as the $87,000 will simply be subtracted from your $5 million lifetime exemption, leaving you with $4,913,000 still left to give, tax-free.
As you can see, this legislation has made conditions very favorable for gifting away money or assets to your loved ones, while at the same time strategically lowering your overall taxable estate (i.e. the amount you own at the time of death that may be taxed).
However, be forewarned that the gift of tax-free giving may not last until 2012, as the gifting and estate tax provisions of the Tax Relief, Unemployment Insurance Re-authorization, and Job Creation Act are slowly creeping toward the Congressional Super Committee chopping block next year.
So if you’re considering taking advantage of these provisions in order to give tax-free gifts to the people you love, talk to your attorney and find out whether planned giving in 2011 makes sense for you. You may find this to be the perfect time to give your loved ones extra-ordinary gifts while skipping out on the crowded stores, bumper- to-bumper traffic and overall holiday chaos this year!
Get Instant Access To My Free Guide
Discover 5 easy ways to make sure your children, wishes and assets stay protected should something happen to you (including tips for a living will)
CLICK HERE TO GET YOUR FREE GUIDE
About Nicole K. White
After losing a close relative, Nicole witnessed the devastation, enormous expense and chaos caused by not having a simple estate plan. It is Nicole’s mission to educate parents, especially single parents, about protecting themselves, their families, minor children, and assets with comprehensive Estate Planning.
