There are some of us who have the financial means to leave behind inheritances that will be more than sufficient to provide for the financial needs of our loved ones throughout their lives and perhaps do the same for succeeding generations. However, the reality is that most people are not in this situation though they do care a great deal about the long term success of their family members. And even if you are in a position to make succeeding generations wealthy it is very likely that you would like to see each of your family members achieve his or her own full potential as individuals.
The first step along this path for most people is going to be a solid education, so when you’re planning your estate you may want to consider the possibility of giving tax-free educational gifts to some of your loved ones while you’re still alive. Each person may pay the school tuition of others as a gift, and these gifts do not impact the lifetime unified estate/gift tax exclusion.
It should be mentioned that fees, books, and living expenses are not included in the educational exemption. However, there is another exemption that provides for gifts of up to $13,000 to an unlimited number of recipients each year free of the gift tax. So you could use this to cover part of the additional expenses, and if you’re married your spouse could do the same upping the amount that you could give your student to $26,000 each year in addition to paying his or her tuition.
Though the estate tax exclusion is currently $5 million, it is scheduled to revert back to the $1 million level that was in place in 2002 when the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 sunsets at the end of next year. So if you’re looking for a way to bring the value of your estate within the estate tax exemption, educational gift giving can help you achieve that goal while providing an heir or heirs with a golden opportunity to do for self.
- Show Your Love by Creating an Estate Plan - March 21, 2023
- What You Need to Know About SECURE Act 2.0 - March 14, 2023
- The Lessons from Lisa Marie - March 7, 2023
