The Perks of Transferring Assets in Life

Many people prefer to give inheritances after passing. However, gifting during your lifetime offers unique advantages for both the giver and the recipient. As explained in Kiplinger’s article, “Gifting While You’re Alive: Tax Benefits and Practical Tips,” this approach allows you to witness the impact of your legacy, maintain greater control, and enjoy potential tax benefits.

Why Consider Gifting While Living?

Gifting during your lifetime lets you:

• See how your generosity improves the lives of loved ones.
• Minimize the tax burden on your estate and your heirs.
• Retain control over how your assets are distributed.

However, gifting should be part of a comprehensive estate plan that aligns with your financial goals. Avoid gifting assets needed for living expenses or those that could create unexpected tax consequences.

Key Gifting Guidelines

1. Annual Gift Exclusion Limits: In 2024, individuals can gift up to $18,000 per recipient without tax consequences. This increases to $19,000 in 2025 ($38,000 for married couples).
2. Direct Payments: Payments made directly to medical or educational institutions for someone’s benefit are not considered gifts and won’t count toward the exclusion limit.
3. Special Assets: Gifting appreciated assets or business shares requires professional appraisals to avoid IRS scrutiny.
4. Inherited Assets: Be cautious when gifting highly appreciated assets. Inheriting these assets may provide a step-up in basis, avoiding capital gains taxes, which do not apply to gifted assets.

Strategic Gifting Opportunities

• Educational Contributions: Use Section 529 plans to fund grandchildren’s education. You can front-load contributions, allowing up to five years’ worth of funding in a single year without triggering gift taxes.
• Intrafamily Loans: Structure gifts as loans for large purchases, like a home, while adhering to IRS guidelines to prevent tax issues.

At The Werner Law Firm, we help clients explore strategies like gifting while living as part of a comprehensive estate plan. Our team of experienced estate planning attorneys can guide you through the advantages and potential pitfalls of transferring assets before death, ensuring your financial goals and legacy align.

If you have any questions, schedule a free appointment with us through our online appointment page.

You can also read reviews from some of the hundreds of clients we have helped over the years.

Reference: Kiplinger (Dec. 4, 2024) “Gifting While You’re Alive: Tax Benefits and Practical Tips”