What to Consider Before Making a Large Financial Gift

What to Consider Before Making a Large Financial Gift

The Tax Cuts and Jobs Act, enacted December of 2017 significantly increased the exemptions for lifetime gift and estate taxes. Currently, the federal exemption is $11.7 million per individual or $23.4 million for married couples. That exemption is set to expire at the end of 2025.

However, with a new administration and Congress, there is always the possibility that those exemptions could be changed even sooner. With so much irregularity surrounding the tax code (and estate taxes in particular), what are some of the estate planning issues you need to consider to reduce your federal taxable estate?

  • Your ability to afford the gift: Just because you can reduce your federal estate value and reduce your tax burden with a large gift does not mean it’s the proper move. You need to consider the long-term financial outlook. Will you continue to have enough assets to maintain your lifestyle? Carefully consider how much you can afford to give without having any sort of negative impact on your own financial goals.
  • Structure of gifting: There are several ways you can structure cash gifts. You can make the gift outright, which is the most straightforward way of gifting. However, there are some drawbacks to this, including demotivating your heirs to manage their assets responsibly, or potentially opening yourself up to financial risk. You can also use trusts, which provide more protection over the assets to be distributed and allow you to distribute in installments or stages while also setting certain conditions on those distributions.
  • Timing: When you should make a gift is often just as important as how much you should gift. Choosing to gift while you’re alive not only helps you reduce estate value, but also allows you to enjoy the impact of your gits. Gifting after death gives more time to prepare your loved ones for the responsibility of their inheritance.

These are just a few issues to consider when making large financial gifts to friends and family, Contact an experienced Florida estate planning attorney at BaumannKangas Estate Law for more information.