One of the most enjoyable things you can do is to give a gift to someone you love. When you see family members light up and look at you with a genuine feeling of gratitude after you have given that carefully selected gift the meaning of the phrase “it is better to give than to receive” really hits home. This is something that you may want to keep in mind when you’re planning your estate.
There is only one thing potentially stopping you from giving gifts to your loved ones while you are still alive to enjoy the experience rather than giving them the entire inheritances after you pass away. This would be the gift tax. The gift tax is unified with the estate tax, and there is a unified gift/estate tax exclusion that stands at $5 million right now. But if you used all of that exemption to give gifts while you are still alive none of your estate would be exempt from the estate tax. However there are some gift tax exemptions that do not impact the unified exclusion and one of these provides for tax-free educational gifts.
Educational gifts really show that you care. It is a very comforting feeling to know that you can go to the school of your choice and have your family pay the tuition, and this freedom can motivate you to scholastic achievement. When you “teach a person to fish” rather than giving them the fish you’re saying that you trust them and expect them to achieve great things on their own. Letting your school-aged heirs know that they can go to any school of their choosing without regard for the costs involved is a gift of immeasurable value.
Plus, when you give these gifts you’re reducing the value of your estate for estate tax purposes. So educational gift giving winds up being a win-win for everyone involved that will strengthen the long-term impact that your family has on the community as your loved ones gain the education that they need to make a difference.
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- Leaving Assets Can Be Tricky – Part 3 - August 13, 2020
