Estate planning questions concerning gift taxation

On behalf of Kaplin Stewart Meloff Reiter & Stein, P.C. posted in Estate Planning on Jan 21, 2016.

A primary goal of many Pennsylvania families is to hand down wealth to the next generation in a manner that preserves as much of that wealth as possible. In fact, many estate planning measures are aimed at that goal. Some families are unsure how to structure their estate plan to ensure that their loved ones receive the greatest possible share of accumulated wealth, without incurring undue taxation.

One option is to begin passing on wealth prior to death. Gifting is a powerful means of reducing an individual’s taxable estate, while also giving adult children a portion of their inheritance early. It has the added benefit of allowing the older generation to see their children and grandchildren benefit from this generosity, which can be incredibly fulfilling for some.

Individuals can gift as much as $14,000 per year to one individual. That gift can be repeated as many times as desired, as long as the recipients are different people. A married couple can combine their gift allowance, and can give $28,000 per individual recipient. Any gift amount beyond that will be subject to a gift tax.

If the gift is in the form of an appreciated asset, the tax ramifications become more complex. The recipient will be taxed on any gains that occur between the time he or she receives the gifted asset and the time the asset is sold. For families who wish to make a gift of an appreciated asset, it is important to discuss the matter with both the recipient and a financial advisor to make sure that a better approach is not available.

Pennsylvania families have a number of options when it comes to handing down wealth to the next generation. While having choices is always a good thing, it is important that both the giver and recipient are aware of the various tax and other financial consequences that come with various options. Structuring an estate planning solution that meets the needs of all parties is a complex matter, which is why working with a qualified estate planning attorney is a wise choice.

Source: newsobserver.com, “Money Matters: Estate planning advice for couple worried about taxes“, Holly Nicholson, Jan. 15, 2016