Benefiting from wealth transfer strategies

Affluent investors in California and across the country who, while they are alive, wish to give a significant sum of money to family members can easily do so through annual gifts. Whether the need is for helping grandchildren with their education or as a gift to a newlywed couple, an annual gift is an excellent wealth strategy that is also tax exempt in certain circumstances.

People who make gifts are required to pay federal gift taxes. However, the Internal Revenue Code provides an annual exclusion, which is $14,000 for a single taxpayer and $28,000 for a married couple. Donors may give up to this amount to as many people as they wish. In cases where a donor wishes to give an annual gift for educational or health purposes, and the donor gives the annual gift directly to the recipient's health care or educational institution, the amount of the gift can be unlimited and will not count against either this exclusion or the lifetime one, which in 2016 stands at $5.45 million for individuals and $10.9 for married couples.

While annual exclusion gifts are beneficial to recipients, they are advantageous to donors, as well. For those who have more capital than they need for their support, it is a good idea to take advantage of the annual exclusion gifts to family members, even though they do not anticipate their estates being charged with estate taxes after they die.

Taking advantage of this annual exclusion can reduce the size of a donor's estate, in many cases below the lifetime exclusion. However, because tax laws are often prone to change, people who wish to preserve their wealth and pass it to their loved ones might wish to contact an experienced estate planning attorney who could explain what options are available to them.


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