Kansas and Missouri Estate Planning

Should I Give Stock Now or Let My Grandkids Inherit It Later?

As with most issues, it depends.

Say you own two blue chip stocks worth $100,000.

They have been very good to you over the many years, paying regular dividends and appreciating quite nicely in value.

You now have grandchildren who are the proverbial apples of your eye.

Consequently, you are considering a transfer of this stock to those grandchildren while you are alive.

For our discussion, we will assume that such transfer would not trigger any gift taxes because the gift will be made among eight grandchildren (i.e., 8 x $14,000 = $112,000).

This is well within the $14,000 you can gift to each grandchild per year.

Is this a good idea?

A recent New Jersey 101.5 article considered this very question in "Tax differences between gifted or inherited stock."

Every move like this has its benefits and its drawbacks.

After all, we do not live in a perfect (or tax neutral) world.

First, an understanding of cost basis and the capital gains tax is in order.

The cost basis is the price you originally paid for the stock. along with other attending acquisition costs like commissions and fees.

When the stock is sold, the resulting tax liability is calculated based on the cost basis and the sales price.

If the stock is sold for more than the original cost basis, the difference will be taxable as a capital gain in the year of the sale.

If a stock is held for more than one year, then it is considered to be long-term.

Long-term capital gains are taxed at lower rates than ordinary income, based on the taxpayer's tax bracket.

If you gifts the shares to your grandchildren, then another factor to consider is their respective ages.

For minor children, the shares would need to be held in "custodial" form, but any adult grandchildren would own their shares directly.

Gifting shares while you are alive will not eliminate any capital gains taxation when the stock is sold.

Translation: Your grandchildren would not only receive the stock from you ... but your basis in it!

When the stock is sold, it is taxed just as if you sold it.

But they will be in a lower tax bracket, right?

Good question.

Likely yes, for those who are adults and just getting started in the work force. In addition, the overall capital gains tax will be spread among eight different taxpayers.

So far, so good.

Problem: What about any grandchildren who are under age 19 or full-time students under age 24?

Result: Some of the tax rate on the sale of the stock may be taxed at their parent's tax rate.

What is this called?

Have you ever heard of the "kiddie tax."

The kiddie tax rules are pretty complex, but as a general rule, children under 19 or full-time students under 24 can exclude the first $1,050 of unearned taxable income from their tax return.

The next $1,050 is taxed at the child's rate. Anything more than that amount is taxed at the parent's tax rate.

So, depending on the specifics, there may be little or no tax savings to be gained by giving the stock to your grandchildren.

In fact, a higher tax rate might be paid if the tax brackets of their parents are higher than yours.

Alternatively, if you leave the stock to these same grandchildren through your estate plan, then your grandchildren would inherit the stock with a cost basis equal to its value at the date of your death.

In addition, your executor may elect to value your entire estate nine months later. This is called the "alternate valuation date."

Either way, this postmortem transfer results in what is know as a stepped-up basis on the appreciated stock.

Bottom line: There is more to meet the eye tax-wise when it comes to this "give now" versus "leave later" decision.

In the meantime, cash is always an appropriate asset for gifting. It is always the right color, fit and style, too. 

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: New Jersey 101.5 (March 3, 2016) "Tax differences between gifted or inherited stock"

Should I Support My "Adult Children" Financially?

Well, that is a call every parent needs to make.

For starters, under Obamacare, childhood has been extended through age 26 for health insurance purposes.

Unfortunately, the horrible economy and non-recovery recovery over the past seven years have left young adults living with mom and dad with a mountain of student debt and with mostly minimum wage employment prospects.

It is tough.

But, alas, things have been tougher in our nation's history for adult children.

For instance, consider those 18 to 26 year olds in the boats enroute to Normandy beach.

Now that is tough.

They were not living at home, worried about health insurance, college loans or even employment.

Just a little historical perspective here.

I digress.

According to a report by the BMO Wealth Institute, fully "[o]ne third of parents with children aged 18-34 are willing to have a less comfortable retirement to support their children."

The title of the report is "The Bank of Mom and Dad: a Source of Comfort for Everyone " and it was the recent subject of the CNN Money article titled "Half of U.S. Parents Would Retire Later to Support Adult Children Financially."

In the mix, there is a tender balance to be struck between a temporary financial bridge to self-sufficiency and a permanent state of financial dependency.

Communication is key.

You should talk with your adult children about the situation and come up with a game plan.

This can help avoid misunderstandings that can lead to resentment that can lead to, well, bad outcomes all the way around.

Here are some practical financial pointers from the BMO Wealth Institute:

Start Early.

It is never too early or too late to teach your children about money at an early age.

Why?

Understanding the basics of personal finance at a young age can help set up a child for future financial success and independence.

Implement a Roth IRA.

Look at ways to leverage a Roth IRA for your own retirement. It can make savings more tax efficient and extend your ability to use your resources to meet financial (retirement included) goals.

While annual contributions are limited by IRS guidelines, the income earned in a Roth IRA is generally not subject to any federal or state tax.

Take Advantage of the Gift Tax Exclusion.

When possible, use the exclusions in the federal gift tax rules to increase the wealth transfer benefits available to adult children and any dependent parents.

Remember, when given directly to an institution instead of to your loved one, gifts made for books and tuition, as well as for medical expenses, are not counted toward the $14,000 you can gift to an individual each year.

Note: If you are married, then you and your spouse may gift a total of $28,000 to any individual annually.

Leave a Legacy of Financial Comfort. 

Make sure your estate plans, including wills and trusts, make provision for your adult children to the extent you wish.

While you are at it, meet with your insurance professional to make sure you have sufficient life insurance for the income needs of your surviving spouse and even adult children who continue to struggle financially.

Fortunately, an experienced estate planning attorney and savvy financial advisor can assist you with reaching your own financial goals (retirement included), while weaving appropriate financial support for adult children into a comprehensive strategy. 

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: CNN Money (December 22, 2015) "Half of U.S. Parents Would Retire Later to Support Adult Children Financially"

How do I make Gifts without any Gift Taxes?

Lifetime gifts are an underutilized way to transfer wealth to loved ones without triggering any transfer taxes.

That noted, you must mind the P's and Q's in the tax code to stay street legal while doing so.

Are you familiar with Form 709?

A recent article from The Motley Fool reminds us that the purpose of IRS Form 709 is to report gifts subject to gift and generation-skipping transfer taxes.

The article is titled "Form 709: Do You Need to File a Gift Tax Return?”

Although this may at first blush seem burdensome, the key is to know when it is required and when it is not.

For starters, the "annual gift exclusion" allows you to transfer up to $14,000 in cash or property to anyone of your choosing.

Consequently, most customary holiday gifts and birthday gifts are below that threshold. 

But what about those holiday commercials where a high school age "princess" awakens to find an brand new Lexus convertible awaiting her in the driveway?

I circle back to that question later on (see below).*

Did you know spouses can transfer unlimited assets between themselves without gift tax consequences?

No Form 709 is needed.

The annual gift exclusion applies to each person receiving a gift.

Say your child is married and in a good, stable relationship. You can give $14,000 to your child and another $14,000 to her spouse without any gift tax concerns. In fact, if you are married, then your spouse can do the same. Result? A nice little wealth transfer of $56,000 (plus the future income and appreciation on the gifted assets).

What if you are a "blended family" and your spouse is not the mother of your child in the above hypothetical? No problem, but you may need to mind Form 709.

A special rule called "gift splitting" allows a spouse in a married couple to make double-sized gifts and have them viewed as made equally by both spouses. However, to keep from paying gift taxes you will need to file a Form 709 Gift Tax return.

Did you know certain gifts are "excluded" from the gift tax calculus?

That is right, to include gifts to cover books and tuition, as well as medical expenses.

The hitch? You must make the gift directly to the institution (e.g., school or hospital), not to the person directly benefiting from your generosity.

What if you made a "taxable" gift (e.g., exceeding $14,000 in a given year to a child)?

As we have seen, depending on the circumstances you may need to file a Form 709 Gift Tax return, but likely no out-of-pocket taxes will be paid by you now.

Why?

Fortunately, under the tax code, the federal gift and estate tax provides treats taxable lifetime gifts the same as gifts made from your estate at death. Currently, each person has a lifetime exemption from gift and estate tax which stands at $5.43 million in 2015.

Accordingly, even after you use up your $14,000 annual exclusion in a given year, any excess amount gifted simply reduces your lifetime exemption amount and the amount you can exempt at death. 

The original article observes that gift tax returns are frequently needed for more complex estate planning strategies, especially certain highly technical wealth transfer techniques.

* Remember that "holiday princess" I mentioned earlier in this post?

What are the gift tax consequences of that new Lexus convertible in the driveway?

Well, let's take a look based on what we have covered in this post.

First, we can assume that a brand new Lexus convertible is priced higher than $14,000. Therefore, the gift likely will exceed the $14,000 gift exemption watermark, if the donor is single. As a result, the donor must file a Form 709 Gift Tax return.

Second, if the donors are a married couple and the "princess" is their daughter, then each spouse can contribute $14,000 each for a total of $28,000. Should the value of the Lexus exceed $28,000, then a Form 709 Gift Tax return will be required.

Third, if the donor is the mother of the "princess" and the stepfather has children of his own, then the donor can make the full $28,000 gift out of her own funds. Then, with the written consent of the stepfather on a Form 709 Gift Tax return, then mother can make the transfer free of gift taxes up to $28,000 (but a Form 709 Gift Tax return will be required if the value exceeds the available exemption).

Whew.

Before making significant gifts consult an experienced estate planning attorney. 

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: The Motley Fool (October 3, 2015) "Form 709: Do You Need to File a Gift Tax Return?”

How Can I Reduce My "End-of-Life Taxes"?

Whether you call it the "death tax" or the "estate tax," it is really the same animal. Albeit the color of the animal will be red or blue depending on your own political and economic perspective.

One political party believes the death tax is the last theft of labor and thrift levied by a government that spends taxpayer money like a drunken sailor.

The other political party believes the estate tax is one to the primary means to fight economic inequality and help "spread the wealth around" from the haves to the have nots.

Fortunately, this blog post is not about politics.

There are websites aplenty devoted to just that, yes?

No, we are going to take a look at the tax itself and consider a few ways to avoid or minimize it.

Note: I will never counsel you "evade" any tax as that can land you in the "crowbar hotel" with three hots, a cot and a roommate not of your own choosing.

I digress.

For simplicity sake today, I will refer to this tax as the "estate tax" since this is how it is known in the Internal Revenue Code.

A recent Fox Business article, titled “2015 Estate Tax Rates: How Much Will You Pay?,” notes that the rate structure for the estate tax has remained virtually unchanged since 2013.

As you can see from the table below, there are various tax rates that apply depending on the value of the taxable estate.  

Amount of Taxable Estate	Tax Bracket
$0-$10,000	18%
$10,001-$20,000	20%
$20,001-$40,000	22%
$40,001-$60,000	24%
$60,001-$80,000	26%
$80,001-$100,000	28%
$100,001-$150,000	30%
$150,001-$250,000	32%
$250,001-$500,000	34%
$500,001-$750,000	37%
$750,001-$1 million	39%
Over $1 million	40% Source: IRS

While these estate values and rates look rather scary, take a deep breath.

The current federal estate tax exemption is $5.43 million per taxpayer, or $10.86 million per married couple.

One of the best wealth transfer opportunities is the annual gift exclusion.

The current amount per donee is $14,000.

That means a grandmother with 10 grandchildren can transfer $140,000 out of her estate each year without any estate or gift tax consequences.

If you want to transfer more than this annual gift tax exclusion, you may use some or all of your "estate tax exemption" while your are alive through "lifetime exemption" gifting.

In other words, you may transfer a combined total of $5.43 million while you are alive or upon your death ... or some now and the rest later.

Your call.

However, when you make taxable gifts in excess of that "lifetime" gift exemption, then it reduces the amount of your estate tax exemption.

This is an excellent flexibility if you have rapidly appreciating assets.

Why?

Because it allows you to push those assets to the next generation along with the future appreciation.

If, when all is said and done at your death, if the value of your estate exceeds the amount of your "remaining" estate tax exemption, then the estate tax will be at the maximum rate of 40% on the portion of your estate above the $5.43 million threshold. 

We really did not even scratch the surface on the lawful means available to avoid or minimize the taxation on your wealth transfers.

Actually, the perfectly timed estate tax plan is to have the last check written on your account bounce to the funeral home. [Just kidding, Todd.]

Contact your estate planning attorney to discuss strategies to leave more money for your heirs and less for taxes. 

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit my estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there. 

Reference: Fox Business (July 16, 2015) “2015 Estate Tax Rates: How Much Will You Pay?”

Gift Tax Fundamentals

I met with some clients recently with one daughter who really racked up the degrees and the attending college/grad school expenses with them. In their estate plan, these clients have provided for their other daughter to get a cash distribution "off the top" to even things out before division into equal inheritance shares.

Today, however, they wanted to know how to "even things out" with gifts right now without paying gift taxes.

Like many Americans, these clients were confused on the current "annual gift exclusion" amount (they thought the amount was still $10,000 instead of $14,000) and legitimate ways to leverage the gifts (they thought it had to be to one's own children and grandchildren). 

Indeed, many other parents find themselves wanting to give a large sum of money to an adult child in need ... or to "even things out".

They often wonder if they can do so without having to pay taxes on their gifts. 

In fact, one such parent recently wrote to Money and asked if he could give $15,000 to a child to pay off the child's debt. 

The answer, given in a Money article titled "When Does a Gift Trigger a Tax Bill?," contains a good explanation of the basics of the gift tax. 

As the article explains, you can give up to $14,000 a year to any one individual without triggering the gift tax. You can also give up to $5.43 million in total gifts during your lifetime, but the amount of your "taxable gifts" directly reduces the amount you can leave in your estate at death. 

For married couples those numbers are doubled. 

It is important to note that more can be given to pay tuition or medical expenses.

Gifts for those purposes are always tax-free, but only if paid directly to the service provider and not channeled through the person benefiting. 

If you need to give more than the annual gift exclusion amount to a child, you might be able to if your child is married. You can give $14,000 to your child and up to another $14,000 to your child's spouse.

This is the counsel I gave to my clients wanting to even things out now. 

If you have other questions about the gift tax or want to know how making gifts can be integrated into your estate plan, speak with an experienced estate planning attorney. 

Reference: Money (May 5, 2015) "When Does a Gift Trigger a Tax Bill?"

The 529 College Savings Plan - A College Funding Phenomenon

Have you checked college costs lately? Well, if you have not, then you either are past the college years in your family ... or you think you have plenty of time to prepare.

If in the former camp, then congratulations. If in the latter camp, then pay heed.

College funding will set you back more than a bit. It can set you back a lot a lot.

To make matters worse for middle-income households, college loans can be complex and pricey. Plus, paying for college out of cash flow will force it to compete with other important household expenses.

Accordingly, 529 college savings plans are an option to begin early, and often.

Consider a recent article in The Legal Intelligencer.

The article, titled “529 College Savings Plans: How They Work,” explains that 529 college savings plans are great financial tools to help you save and set aside money specifically for the purpose of funding higher education.

Even better, 529 plans are "tax advantaged" when used for qualified education expenses. In addition to tax advantages, the benefits include flexibility and control.

And, a 529 college savings plan is not restricted to the parents of a future scholar.

No, indeed.

Grandparents, a favorite uncle or anyone can make contributions for qualifying higher-education expenses without income limits. 

The 529 owner keeps control of the assets and is allowed to choose how much and when money can be withdrawn. T

he owner also can change the beneficiary to a different family member related to the original beneficiary (see your estate planning attorney for the rules on this) whenever they like, and the investment allocation can be adjusted once a year. 

So, what about federal income tax savings? While the 529 plan account can grow tax free, the contributions are not deductible. However, any withdrawals from the 529 plan expressly for qualified higher-education expenses are also federal income tax free.

What about non-qualified withdrawals?

They will be socked with regular federal income taxation, plus a 10% penalty.

Ouch.

I guess you could say the law has "carrots and sticks" to encourage and discourage various taxpayer behaviors.

One other feature of a 529 plan is that it can be an effective estate planning tool.

A 529 savings plan can decrease future estate taxes by lifetime gifting. As much as up to $14,000 of the annual gift tax exclusion per contributor can be taken when transferring assets to a child or grandchild (or up to $70,000 with a five-year election).

How is that? I thought the 529 plan contributor was the "owner," too.

True, however, when the contribution is made to the 529 plan, the law says they are viewed as being removed from the account owner's estate, even though that owner still has control over the distribution of the plan itself.

Sweet. 

Now for the fast-talking-disclaimer-that-always-accompanies-some-too-good-to-be-true radio advertisement: 

Your participation in a 529 plan does not guarantee that contributions and investment returns will be enough to cover higher education expenses. Contributors assume all investment risk, including the potential for loss of principal, and any penalties for non-educational withdrawals. Your state may offer state tax advantages to residents who participate in the in-state plan.

Be sure to contact an experienced estate planning attorney to explore the many options available. Chances are if he or she does not have all of the answers, then he or she will know someone who does.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website. 

Reference: The Legal Intelligencer (March 3, 2015) “529 College Savings Plans: How They Work”

Estate Tax Basics

Taxes related to your estate are some of the most complex in the entire tax code. Why are they so complex? According to "Sutton's Law," named after famous bank robber Willie Sutton, "That's where the money is."

Consequently, it is only prudent that you apprehend some of the basic laws impacting your estate so you can safely navigate them.

A recent Motley Fool article, titled “Estate Tax in 2015: 4 Rules You Should Know,” can help you jumpstart your estate tax education. 

The estate tax exclusion is now $5.43 million. The federal estate tax applies only to those whose taxable estates exceed a certain amount. The United States has a unified gift and estate tax system. As a result, if you make taxable gifts during your lifetime, then you will use up some of this $5.43 million in advance. Even though you will not have to actually come up with funds to “pay” a gift tax at the time you make the gift, you will need to file a gift tax return.

The annual gift tax exclusions is still $14,000. This annual gift exclusion makes most gifts nontaxable, allowing you to give up to $14,000 in cash or property to anyone again this year. 

Gift or estate tax? The estate tax laws have rules making certain types of gifts and bequests non-taxable. Take the marital deduction as an example. This deduction allows spouses to give as much as they wish to one another without any gift or estate tax consequences. Similarly, charitable donations are not subject to taxation, either through your estate or as lifetime gifts.

You can also make gifts for educational expenses or medical expenses in an unlimited amount without any estate or gift taxes. However, you must pay the institution directly, rather than sending money through the family member or other person who incurred those educational or medical expenses.

Otherwise, you will be denied this special exclusion and your generousity will be counted toward your $14,000 annual gift exclusion for the person whom you are benefitting. As noted earlier, any amount over your annual gift exclusion will reduce your unified estate and gift exemption and require you to file a gift tax return.

I told you this stuff was complicated.

Double your estate tax exemptions if you are married. If you are married, the typical estate plan involves leaving everything to your surviving spouse. In the past this meant forfeiting the estate tax exemption available in the estate of the first decedent spouse. Now, however, with the new "portability" laws a surviving spouse can "inherit" the unused estate tax exemption of the deceased spouse.

While portability has been a permanent part of the estate tax laws since 2013, you should have your estate plan reviewed to make sure it remains an option for your estate and changes can be made if out-of-date.

There, that is an overview of some practical estate planning pointers. Be sure to consult an experienced estate planning attorney and discuss these issues in the context of your unique circumstances. 

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website. 

Reference: Motley Fool (December 28, 2014) “Estate Tax in 2015: 4 Rules You Should Know”

Gifting Rules - Do's and Don'ts

When we hear the word "gifting," you think of common everyday gifts for birthdays, Christmas and the like, yes? Things can get a bit more complicated if you are looking gift something more than a sweater. 

No, real gifting (i.e., wealth transfers) take a little more understanding and planning.

In certain states, for example, the estate exemption is just $1 million, not the $5 million (indexed for inflation) as at the federal level.

Consequently, CBS Boston's recent posting, titled “All About Gifting Assets,” warns you should have a good estate planning attorney help you safely navigate the state and federal tax rules.

Did you know the annual gift exclusion for anyone is $14,000. That means you can transfer this amount this year (and then next) to as many recipients as you want, provided you have the money to make the gifts.

If married and your spouse joins in, then you can gift a total of $28,000. In addtion, you can pay medical or school bills for any individual and not incur a gift tax if handled properly. In other words, such “gifts” are not counted toward that gift exemption amount.

Taking advantage of these opportunities is a great idea. Why not give away some money to help your next generation accomplish its goals? For instance, if you have an estate worth $1.2 million, there will be no federal estate taxes but (depending on where you live) some state estate taxes. Would you rather give it away to your family or to the government?

If any of your grandchildren are in college or graduate school you can pay their tuition and medical insurance, but you need to pay it directly to the school or insurance company. And after paying the bills (if you still have some money left), you can still hand over a check to them for $14,000, or with your spouse, you can make it $28,000.

As the original article counsels, be sure to seek appropriate legal advice before making transfers valued more than customary gifts during the year.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.

Reference: CBS Boston (November 26, 2014) “All About Gifting Assets”

Another New Year's Resolution - Your Estate Plan

As you read this, your mind may be filled with visions of sugarplums as they dance in your head ... instead of your estate plan (or lack thereof). Alas, I am here to bring you some good cheer - there is always next year.

But do not tarry, my good lad or lass.

This most timely topic was the theme of a recent article in the Pittsburgh Post Gazette titled "Holiday season is the best time to update your estate planning."

In that spirit, here are some questions you ought to ask yourself as 2015 draws near:

What assets do you have that are subject to having a beneficiary (or more) designated to inherit them (think life insurance, IRAs, 401ks, etc.)?  Do you want the same beneficiaries on all of these? If not, plan to change them.

Do you have contingent beneficiaries, if the first beneficiary predeceases you? If the answer is no, you could pay significant taxes for your IRA, for example. Some of the money will go to income taxes because the funds are going to your estate instead of being able to "stretch" out the distributions over the life expectancy of the beneficiary.

Have you sat down with an estate planning attorney to create your estate planning documents? If yes, then consider reviewing them before the family gatherings and make any changes needed. On the other hand, many of my clients change their estate plans after the holiday gatherings, especially if they have only just begun to wear hearing aides!

Who is going to handle your affairs if you are incapacitated or when you pass away? Designate the individuals you trust to take care of your affairs before they are needed, and make sure they will agree to do it. While you are at it, make sure your family members know your wishes for health care decisions and end-of-life choices.

Do the parties acting on your behalf know the location of your important documents, like power of attorney and health care directives? You do not need to give out copies of these documents, but let someone know where they can find them.

Last but not least—before the year ends—are you able to make gifts of some of your assets to loved ones?  If you are financially able, take advantage of the $14,000 annual exclusion from federal gift taxes to give that amount to as many people as you want. Yes, even your favorite estate planning attorney is an eligible beneficiary. Ha!

Make it a truly Happy New Year and get that estate plan together sooner rather than later.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.

Reference: Pittsburgh Post-Gazette (November 23, 2014) "Holiday season is the best time to update your estate planning"

Lifetime Gift Exclusion – A Wealth Transfer Bonanza / Overland Park, KS

With the current laws on the books, we truly live in a golden era of gift giving and estate planning. But you need not take my word for it. According to official numbers recently released by the IRS, U.S. taxpayers transferred $122 billion in non-taxable gifts in 2012.

To put that number in perspective, it is quadruple the tax-free gift giving of 2011 and 2012 combined.

This wealth transfer tsunami was the subject of a recent Bloomberg article titled “Tax-Free Gifts Quadrupled in U.S. After IRS Limit Lifted.”

When Congress opens a tax planning window it also can close that window. That was the concern for taxpayers and their planners in 2010, when the laws went into effect raising the lifetime gift exclusion amount to a lofty $5 million per taxpayer.

Generally speaking, the IRS taxes gifts of assets between people unless they happen to be spouses, but only if the gifts exceed the annual gift exclusion. That is the amount anyone can give to any number of people each year.

Currently, that annual gift exclusion amount is $14,000.

In addition, during your lifetime you also get a separate lifetime gift exclusion amount that applies toward really large gifts. That is your “lifetime gift exclusion.” Note: Any gifts you make in excess of the annual gift exclusion must be reported on a timely IRS Form 709 Gift Tax Return and will reduce the amount of the “estate tax exclusion” available upon your death.

The lifetime gift exclusion increased from $1 million to $5 million in 2010. This was intended to be a temporary law and was set to expire at the end of 2012. Except, of course, the law was renewed. Take a look at the Bloomberg article for more on the hard numbers and bit more of the backstory.

With the 2012 IRS statistics now in, it is clear that taxpayers decided it was time to move and escape a potentially falling tax ceiling. Fortunately, we have another reprieve and a bit more time, with the numbers still working in our favor in Overland Park and elsewhere.

Have you been taking advantage of the current laws and putting your plan into action?

Remember: what the IRS gives, the IRS can take away.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.

Reference: Bloomberg (January 27, 2014) “Tax-Free Gifts Quadrupled in U.S. After IRS Limit Lifted”