At different times of the year, most of us associate those static goings-on with important reminders of other things we need to do. When the time changes twice a year, we’re often prompted to change the batteries in our smoke alarms. Before vacation every year, we typically have our tires rotated and allow our trusted mechanic to give the loyal motorized vehicle the once-over and when December rolls around, it’s just natural for many of us to consider the plights of others. We typically make our charitable contributions around that time and generally are in a giving mindset. It’s the ideal time to consider gifting assets, too.
Taxes and Gifting Assets
As you may know, the current federal estate tax exemption is $5.34 million for 2014. In 2015, it increases to $5.43 million. This means any estate that exceeds those figures, and respective of the calendar year, will face hefty estate taxes for every dollar over those amounts. The good news from that perspective is that married couples are afforded unlimited gifting between them.
Gifting in Massachusetts
Here’s where things can become a bit murky. Those dreaded state taxes will kick in if your estate is worth more than $1 million. You may never have to worry about federal estate taxes, but there’s a good chance that you’ll have to factor in the Massachusetts tax.
There’s one point that’s crucial in this dynamic: You may gift up to $14,000 per person (as many as you choose) without being hit with a tax. If your spouse is living, you can double that figure to $28,000 per person. This is important for a number of reasons. First, by gifting, you get the tax advantages, but let’s delve a bit further. Your granddaughter may be preparing for college. You may pay her tuition with the gifting option – again, up to $14,000 or as a couple, $28,000. This can ease a sometimes stressful time for young people who are worried about affording college.
Not only that, but you can also use your generosity by paying a remaining balance for a loved one who’s now facing massive medical bills. Same rules apply – keep it within the guidelines and you don’t have to worry about the tax man.
This is a win-win on a number of fronts. First, you’re benefitting someone you love with a financial windfall. You’re also eliminating the taxes that your estate that you’d otherwise have to pay. Even if your estate comes in less than the federal amount, it’s important to remember the magic number for the state is just $1 million. Odds are, you’ll need to make the payment to the college or the hospital, though you can still gift cash if you choose. A qualified estate planning attorney can provide guidance.
To learn more about gifting assets and any tax repercussions, contact our offices today. We stand ready to guide you through the various laws as you seek to protect what you’ve worked hard to earn.