A lot is said about the intricacies of estate planning, but in the end it is a reasonably basic matter.
The point is to direct assets that once belonged to you into the possession of your successors as quickly and merely as possible. When this is done after you pass away the last will or some type of trust is often used to achieve this, however the reality is you can pick to transfer assets to others while you are still alive. This could be done through making gifts. Of course we’re all knowledgeable about the immediate sensation of complete satisfaction that a person experiences through the pleasure of giving. This in itself makes present giving something that you might wish to think about. Besides the fulfillment and pleasure there are useful benefits to this strategy as well.
For one thing, there is a $5 million estate tax exemption. Under existing law the exemption is unified with the present tax exemption. So if the overall value of your estate is more than $5 million you would succeed to lower its value to get estate tax effectiveness. Because these two levies are combined, if you were to utilize some portion of this $5 million to offer tax-free presents while you are still alive that quantity would be subtracted from your offered estate tax exclusion.
In addition to the exemption, each taxpayer might quit to $13,000 per year to an unlimited variety of present recipients, complimentary of the present tax without affecting their lifetime merged gift/estate tax exemption. This is something that can be used to terrific benefit if you make yearly presents to a number of various people over a sustained duration of time.
Lifetime gifting can also work to those who are searching for methods to “invest down” their assets in an effort to get approved for Medicaid to spend for long-term care. There is, nevertheless, the five year “look back” period to consider. Making substantial gifts within five years of obtaining Medicaid to pay for long-term care can lead to a penalty, generally an extension of time before you might receive Medicaid benefits.
So you should carefully plan ahead to take advantage of this opportunity. And there are various methods to present assets, some more helpful than others. The very best method to do so is with the guidance of an estate planning attorney who has a wealth of experience assisting clients prepare to address long-lasting care expenses.