New York Estate Planning & Elder Law

Should You Gift Stocks as Part of Your Estate Plan? / White Plains, NY & New York, NY

“Gifting stock to family members may lack the pizzazz of leaving a luxury car adorned with a bow in the driveway, but it’s a gift that can add value to their lives long after most other gifts have been forgotten.”

There are a number of ways to gift stock to family members, during your lifetime or after you die, according to a recent article from Think Advisor titled “Gifting Stock to Family Members: What You Need to Know.” The idea is simple, but how the gifting is done and what taxes may or may not need to be paid (and by whom) requires a closer look.

A gift of stock today is made through an electronic transfer from your account to the investment account of the recipient of the shares. The rules for gifting shares of stocks also apply to gifting ETFs and mutual funds.

Lifetime gifts. Stock gifts can be made in place of giving cash. The annual gift limit of $15,000 per person or $30,000 for a joint gift with your spouse, applies, and the value of the stock on the day of the transfer constitutes the amount of the gift.

If you gift in excess of the annual gifting limits, this takes a bite out of your lifetime gift and tax exemption, which as of this writing is $11.7 million per person for federal estate taxes. That’s something to keep in mind when deciding on your gifting strategy.

Using a trust for gifting. Instead of giving cash to a family member, you could use a trust and transfer your shares into the trust, with the family member as a beneficiary of the trust. The treatment of tax and cost basis issues will depend upon the type of trust used. Your estate planning attorney will be able to help you determine what type of trust to use.

Transfer on death. You can also gift stocks to others through your will, through a transfer on death designation in a brokerage account, through a beneficiary designation in a trust if the securities are held there, or through an inherited IRA. Taxes and cost basis will vary, depending upon your circumstances.

Taxes and gifting stock. There are no taxes and no tax implications at the time stocks are gifted to someone, but there are some issues to know before making the gift.

When stocks are given to a relative, there is no tax impact for the donor or the person receiving the stock, and as long as the value of the stock is within the annual gifting limits, the donor does not have to do anything. If the gift value exceeds the limit, the person has to file a gift tax return.

The recipient of the stock shares doesn’t owe capital gains taxes until the stocks are sold. At that time, the cost basis and holding period of the person who gifted the shares will need to be known in order to determine the tax liability.

If the stock is gifted at a price below the donor’s cost basis and sold at a loss, the recipient’s cost basis and holding period is determined by the fair market value of the stock on the date of the gift. However, if the price of the shares increases above the donor’s original cost basis, their cost basis and holding period need to be known to calculate the recipient’s capital gain.

Gifting to children or grandchildren. Gifting shares of appreciated stock to children and grandchildren can make sense for the donors since they are taking the value of the stock out of their estate and gifting it to a child or grandchild in a lower tax bracket. The recipient or their parents could sell the shares and pay a lower capital gains rate, or even no capital gains taxes. However, if the recipient is a current or future college student, or the student’s parent, the gift could reduce eligibility for need-based financial aid. The stock may need to be reported as an asset belonging to the student or the parent, increasing their income when they are received and/or when they are sold.

Speak with your estate planning attorney before gifting stock or cash to family members. There will be sensible ways to be generous without creating any issues for recipients.

Reference: Think Advisor (Jan. 25, 2021) “Gifting Stock to Family Members: What You Need to Know”

For more information on asset preservation and estate planning, please visit my estate planning website.

How Can Blended Families Use Estate Planning to Protect All of the Siblings? / Greenwich, CT & New York, NY

“No matter how solid the relationships might be, it is important for parents to be aware how blended families can create unique estate planning issues.”

If two adult children in a blended family receive a lot more financial help from their parent and stepparents than other children, there may be expectations that the parent’s estate plan will be structured to address any unequal distributions. This unique circumstance requires a unique solution, as explained in the article “Estate Planning: A Trust Can Be Used to Protect Blended Families” from The Daily Sentinel. Blended families in which adult children and stepchildren have grandchildren also require unique estate planning.

Blended families face the question of what happens if one parent dies and the surviving step parent remarries. If the deceased spouse’s estate was given to the surviving step parent, will those assets be used to benefit the deceased spouse’s children, or will the new spouse and their children be the sole beneficiaries?

In a perfect world, all children would be treated equally, and assets would flow to the right heirs.  However, that does not always happen. There are many cases where the best of intentions is clear to all, but the death of the first spouse in a blended marriage changes everything.

Other events occur that change how the deceased’s estate is distributed. If the surviving step-spouse suffers from Alzheimer’s or experiences another serious disease, their judgment may become impaired.

All of these are risks that can be avoided if proper estate planning is done by both parents while they are still well and living. Chief among these is a trust because a simple will does not provide the level of asset control needed in this situation. Don’t leave this to chance—there’s no way to know how things will work out.

A trust can be created so the spouse will have access to assets while they are living. When they pass, the remainder of the trust can be distributed to the children.

If a family has helped out two children more than others, as mentioned above, the relationships between the siblings that took time to establish need to be addressed while the parents are still living. This can be done with a gifting strategy, where children who felt their needs were being overlooked may receive gifts of any size that might be appropriate, to stem any feelings of resentment.

That is not to say that parents need to use their estate to satisfy their children’s expectations. However, in the case of the family above, it may be a reasonable solution for that particular family and their dynamics.

A good estate plan addresses the parent’s needs and takes the children’s needs into consideration. Every parent needs to address their children’s unique needs and be able to distinguish their needs from wants. A gifting strategy, trusts and other estate planning tools can be explored in a consultation with an experienced estate planning attorney who creates estate plans specific to the unique needs of each family.

Reference: The Daily Sentinel (Dec. 16, 2020) “Estate Planning: A Trust Can Be Used to Protect Blended Families”

For more information on asset preservation and estate planning, please visit my estate planning website.

Estate Planning Actions to Consider before 2020 Ends / White Plains, NY & Greenwich, CT

“If you have not already been inundated with invitations to webinars, articles and newsletters regarding  estate planning, you should consider doing so before the end of the year, since you undoubtedly will receive these over the next few months.”

When it comes to estate planning, there’s no such thing as a “one-size-fits-all” solution. That is especially true before a presidential election. However, there are several factors that should be considered and discussed with your estate planning attorney, as recommended in this recent article from The National Law Review “Top Ten Estate Planning Recommendations before the End of 2020.”

The estate, gift and generational-skipping transfer tax exemption is now $11.58 million per person. It’s scheduled to increase every year by an inflationary indexed amount through 2025 and, in 2026, will revert to $5 million. If Biden wins the election, don’t be surprised if changes are made earlier. The IRS has already said that if the exemption is used this year, there will be no claw back. This is a “use it or lose it” scenario. If you are planning on using it, now is the time to do so.

It is possible that Discounts, GRATS, Grantor Trusts and other estate planning techniques may go away, depending upon who wins the election and control of Congress. Consider taking advantage of commonly used estate planning tools before it is too late.

Married couples who are not ready to gift significant amounts to their children or to put assets into trusts for their children should consider the SLAT–Spousal Lifetime Access Trust. They can create and gift the exemption amount to a SLAT and still maintain access to the assets.

Single individuals who similarly are not ready to make large gifts and give up access to assets may also create and gift an exemption amount to a trust in a jurisdiction based on “domestic asset protection trust” legislation. They can be a beneficiary of such a trust.

Interest rates are at an all-time low, and that is when tools like intra family loans, GRATs and GLATs are at their best.

Moving to Florida, Nevada, Texas and other low- or no-income tax states has become very popular, especially for people who can work remotely. Be aware that high tax states like New York and California are not going to let your tax revenue leave easily. Check with your estate planning attorney to make sure you’re following the rules when giving up your domicile in a high-income tax state.

Reference: The National Law Review (Oct. 6, 2020) “Top Ten Estate Planning Recommendations before the End of 2020”

For more information on asset preservation and estate planning, please visit my estate planning website.

Making the Most of Exemptions and Flexibility in Gifting / New York, NY & White Plains, NY

“Federal estate, gift and GST tax exemptions are currently at historic highs ($11.58 million per individual in 2020). These higher exemptions are scheduled to return to $5 million, adjusted for inflation, after December 31, 2025, but they could be reduced before then, as a result of political or policy changes.”

The time period available to take advantage of the high transfer tax exemption has driven many to make or give more serious thought to making large gifts while exemptions are certain. However, not everyone is ready or able to give away large amounts of wealth in case they may be needed in the future. For those who are concerned about needing these assets, there are some strategies that can build flexibility into gift planning, reports the article “Five Ways to Build Flexibility Into Your Gift Planning” from Financial Advisor Magazine.

Spousal Lifetime Access Trust, or SLAT, is one option for married couplies. This is a type of irrevocable trust that includes the grantor’s spouse as one of the beneficiaries. The couple can enjoy the gift tax exemption, because the trust is funded while one spouse is living, but they can also have access to the trust’s assets because the grantor’s spouse may receive both income and principal distributions. A few things to keep in mind when discussing this with your estate planning attorney:

• If both spouses want to create a SLAT, be careful not to make the trusts identical to one another. If they are created at the same time, funded with the same amount of assets and contain the same terms, it is possible they will not withstand scrutiny.
• The term “spouse” has some flexibility. The spouse could be the current spouse, the current spouse and a future spouse, or a future spouse for someone who is not yet married.

Special Power of Appointment is a power granted to a person to direct trust assets to a specified person or class of people (other than the power holder, the estate of the power holder or the creditors of either one). The power holder may direct distributions to one or more people, change the beneficiaries of the trust and/or change the terms of the trust as long as the changes are consistent with the power of appointment. Note the following:

• The permissible appointees of a power of appointment can be broad or narrow, and the grantor may even be a permissible appointee for outright distributions.
• If the grantor is a permissible appointee, special care must be taken when naming the power holder(s) to avoid any challenge that the trust was always intended for the grantor. The trust may need to have multiple power holders, or a third party, to agree to any distributions.

A Trust Protector is a person who has powers over the trust but is not a trustee. This is an increasingly popular option, as the trust protector has the ability to address issues and solve problems that were not anticipated when the trust was created. The Trust Protector may often remove or replace trustees, make changes to beneficiaries, divide the trust, change administrative provisions, or change trust situs.

A Disclaimer is used when a gift recipient renounces part or all of a gift transferred to them. When a gift is made to a trust, the trust instrument is used to specify how the assets are to pass, in the event of a disclaimer. If the grantor makes a gift to the trust but is then concerned that the gift is unnecessary or the grantor might need the assets back, the trust can provide that the assets revert to the grantor in the event of the disclaimer.

Planning with Promissory Notes is another way to include flexibility in the timing, implementation and amount of gift planning. An asset is sold by the grantor to a grantor trust in exchange for a promissory note. There are no income tax consequences as the sale is to a grantor trust. If the sale is for full market value, there is no gift. The grantor gets to decide when, and if, to make a gift with the promissory note.

Speak with your estate planning attorney to determine which, if any, of these strategies is the right fit for you and your family. While it is impossible to know exactly when and how the federal exemptions will change, there are many different tools that can be used while waiting for any changes.

Reference: Financial Advisor Magazine (Sep. 10, 2020) “Five Ways to Build Flexibility Into Your Gift Planning”

For more information on asset preservation and estate planning, please visit my estate planning website.

Gifting Can Help Estate Plans and Heirs Reach Goals / New York, NY & Greenwich, CT

“Despite many attempts at repeal over the years, the modern U.S. Estate Tax has been in place since September 8, 1916. Each U.S. citizen and resident alien is entitled to a lifetime exemption from the federal Gift/Estate Tax called the Applicable Exclusion Amount.”

The applicable exclusion amount for gift/estate tax purposes is $11.58 million in 2020, a level that makes incorporating gifting into estate plans very attractive for high net-worth families. If a donor’s taxable gift—one that does not qualify for the annual, medical or education exclusion—is in excess of this amount, or if the value of the donor’s aggregate taxable gifts is higher than this amount, the federal gift tax will be due by April 15 of the following year. The current gift tax rate is 40%.

This presents an opportunity, as described in detail in the article “The Case for Gifting Now (or At Least Planning for the Possibility” from The National Law Review.

If the exclusion is used during one’s lifetime, it reduces the amount of the exemption available at death to shelter property from the estate tax. With proper planning, spouses may currently gift or die with assets totaling as much as $23.16 million, with no gift or federal estate tax.

To gain perspective on how high this exclusion is, in 2000-2001, the applicable exclusion amount was $675,000.

The exclusion amount will automatically decrease to approximately $6.5 million on January 1, 2026 unless changes are made by Congress before that time to continue the current exclusion amount. Now is a good time to have a conversation with your estate planning attorney about making gifts in advance of the scheduled decrease and/or any changes that may occur in the future. The following are reasons why this exemption may be lowered:

• Trillions of dollars in federal stimulus spending necessitated by the COVID-19 pandemic and the severe economic downturn in the U.S.
• Past precedent of passing tax legislation mid-year and applying it retroactively to January 1.
• A possible change in party control for the presidency and/or the Senate
• The use of the budget reconciliation process to pass changes to taxes.

In the 100-plus year history of the estate tax, the exemption has never gone down. However, the exemption has also never been this high. The possibility of a compressed timeframe for family business owners and wealthy individuals to implement lifetime gifts before any legislative change may make a tidal wave of gifting transactions challenging between now and December 31, 2020. Now is the time to start planning and take action to utilize the exclusion amount.

Reference: The National Review (Aug. 20, 2020) “The Case for Gifting Now (or At Least Planning for the Possibility”

For more information on asset preservation and estate planning, please visit my estate planning website.

Combining Households during Coronavirus / New York, NY & Greenwich, CT

“If family members are anxious about each other, sometimes it seems it might be easier if they simply joined households. This is not just due to COVID-19.”

Not that long ago, multigenerational living was how most people lived.  Since people are living longer, it may become the norm again. In times of crisis like these, says the article “Moving ahead during coronavirus,” from The Mercury, many parents and adult children are combining family units to care for each other.

Parents might move in with their son or daughter’s family. The adult children and their spouse and children may also come to live with Mom and Dad. It is not just about parents and children, since siblings also decide it’s better for everyone to live closer.

If family members are considering combining households, they need to create a plan for important issues. Who will pay for what, what is the back up if the arrangement does not work and what boundaries will be set, so that the children and their parents have a sense of privacy?

Conversations about how this arrangement relates to the parent’s overall estate plan also need to take place. Will parents fund the entire household, if one or more adult children are not working? Will there be expectations of eventual re-payment? How does the household pay its bills and who will be responsible for what chores?

An important question to address is the issue of a parent’s gifting assets to the adult child. If the long-term plan is for the parent to apply for Medicaid, it will be important to plan any asset transfers to avoid having the parent become ineligible for long-term care coverage.

It’s easy for this kind of joint living arrangement to be derailed by misunderstandings and expectations that are not discussed. Writing out a document with the help of an estate planning attorney can make the discussion more concrete and ensure that the agreement will complement and not conflict with the estate plan. Every situation is different, and what works for one family may not work for another. Having an outside professional involved can reduce the emotional aspect and clear the way for a happy arrangement that works for everyone.

Reference: The Mercury (July 28, 2020) “Moving ahead during coronavirus”

For more information on elder law, retirement planning and estate planning, please visit my estate planning website. 

How Family Businesses Can Prepare Now for Future Tax Changes / Greenwich, CT & White Plains, NY

“Coupled with the upcoming presidential election, small to mid-sized business owners are faced with a slew of financial decisions that could impact the wealth of their business and the legacy they leave to their successors.”

The upcoming presidential election is giving small to mid-sized business owners concerns regarding changes in their business, business succession planning, and the legacy they leave to family members. The recent article “How family businesses can come out on top in presidential election uncertainty,” from the St. Louis Business Journal looks at what’s at stake.

Tax breaks. The current estate tax threshold of $11.58 million is scheduled to sunset at the end of 2025, when it will revert to the pre-2018 exemption level of $5 million (as indexed for inflation) for individuals. If that law is changed after the election, it’s possible that the exemption could be phased out before the current levels end.

Increased tax liability. These possible changes present a problem for business owners. Making gifts now can use the full exemption, but future gifts may not enjoy such a generous tax exemption. Some transfers, if the exemption changes, could be subject to gift taxes as high as 40%.

Missed opportunity with lower valuations. Properly structured gifts to family members which benefit from lower valuations (that is, before value appreciation due to capital gains) and current allowable valuation discounts give families an opportunity to pass a great amount of their businesses to heirs tax free.

Here’s what this might look like: a family business owner gifts $1 million in the business to one heir, but at the time of the owner’s passing, that share appreciates to $10 million. Because the gift was made early, the business owner only uses up $1 million of the estate tax exemption. That’s a $9 million savings at 40%; saving the estate from paying $3.6 million in taxes. If the laws change, that’s a costly missed opportunity.

It’s better to protect a business from the “Three D’s”—death, divorce, disability or a serious health issue, by preparing in advance. That means the appropriate estate protection, prepared with the help of an estate planning attorney who understands the needs of business owners.

Consider reorganizing the business. If you own an S-corporation, you know how complicated estate planning can be. One strategy is to reorganize your business, so you have both voting and non-voting shares. Gifting non-voting shares might provide some relief to business owners who are not yet ready to give up complete control of their business.

Preparing for future ownership alternatives. What kind of planning will offer the most flexibility for future cash flow and, if necessary, being able to use principal? Grantor Retained Annuity Trusts (GRATs), entity freezes, and sales are three ways the owner might retain access to cash flow, while transferring future appreciation of assets out of the estate.

Know your gifting options. Your estate planning attorney will help determine what gifting scenario may work best. Some business owners establish irrevocable trusts, providing asset protection for the family and allowing the trust to have control of distributions.

Reference: St. Louis Business Journal (April 3, 2020) “How family businesses can come out on top in presidential election uncertainty”

For more information on asset preservation and estate planning, please visit my estate planning website.

Hey Dad, Can I Get an Advance on My Inheritance? / White Plains, NY & Greenwich, CT

“What is equal treatment at time of death can be disputed among the children, when some children have received substantially more in lifetime gifts than the others.”

Most parents want to divide their estate equally among their heirs, but sometimes things just don’t work out that way. That’s especially the case when one child needs more help than another. Therefore, what parents will often do is count the distributions they make during their lifetime as advances against the child’s future inheritance. This doesn’t always go smoothly, says the article “Lifetime advances of inheritances” from Lake County News.

Equalizing distributions to some children to offset any substantial distributions made to offset the total distribution can lead to trouble, if certain legal requirements are not addressed. In California, the Probate Code is very specific. There are three different approaches in which lifetime distributions are counted as advances of inheritances at death:

1. The instrument provides for deduction of the lifetime gift from the at-death transfer
2. The transferor declares in a contemporaneous writing that the gift is in satisfaction of the at-death transfer or that its value is to be deducted from the value of the at-death transfer and
3. The transferee acknowledges in writing that the gift is in satisfaction of the at-death transfer or that its value is to be deducted from the value at the at-death transfer.

In the first example, the decedent’s will, or trust expressly says that lifetime distributions are to be counted against the future inheritance. This may state a specific dollar amount or may refer to a ledger that tracks ongoing lifetime gifting. The ledger approach is often used when a child is dependent upon a parent for ongoing support, paying off school loans or paying a mortgage.

The second example, which involves a written record of the gift, was the subject of a recent appellate court decision. The deceased father kept track of all monetary gifts to his children. The father’s bookkeeper maintained a spreadsheet and was told by the father that the list was important, so that the payments would be deducted from inheritances. At the father’s death, the son had received more than $450,000 more than the daughter. The son contested the daughter’s request for equalizing the inheritance based on the ledger. The appellate court stated that the ledger met the requirements to serve as a contemporaneous written record. The court also found that the permanent ledger was property authenticated and entered into evidence, based on the daughter’s testimony that she found the ledger among her father’s papers and that it was written in her father’s handwriting.

In the third scenario, where there was a written acknowledgment by the person receiving the “advance” that the money was in satisfaction of the at-death transfer, the court found that the requirement was satisfied and the son had acknowledged that the assets given to him were advances on his inheritance.

A better scenario, and one that would have prevented some, if not all, of the litigation described above, would be to have estate planning documents that clearly state whether any disproportionate lifetime gifting to beneficiaries is to be offset with equalizing payments to the other beneficiaries at death. Your estate planning attorney will be able to create the best plan if your heirs need financial support, following the laws of your state.

Reference: Lake County News (March 14, 2020) “Lifetime advances of inheritances”

For more information on asset preservation and estate planning, please visit my estate planning website.

Charitable Giving, Tax Planning, RMDs, Charitable Remainder Trusts, Gifts, Heirs, Charities, Estate Planning

“Giving appreciated stock shares, donating your RMDs and using charitable remainder trusts are just a few of the options you may not be aware of to help charities and your heirs at the same time.”

America is a country of generous people. We give to organizations that we feel connected to, and we give to charities that we feel are important. We also give to honor our loved ones, to make life better in our communities and to help when disaster strikes.

Most people don’t give to charity purely for the tax benefits, but charitable giving has long provided a  way of both donating to causes that matter while also lowering income taxes during our lifetimes as well as helping minimize estate taxes when we die, says the article “5 Ways to Incorporate Charitable Giving into Your Estate Plan” from Kiplinger. Therefore, if you are charitably minded, why not achieve the most tax-savings you can? Here are five ways to do this.

Appreciated Stock. Gifts of publicly traded stock that has grown or appreciated in value is a good way to support a charity while you are living. If you sell appreciated stock, you will need to pay capital gains tax on the appreciation. However, if you donate appreciated stock to a charity, you’ll receive a charitable income tax deduction equal to the full market value of the stock at the time of the gift. That avoids capital gains taxes and, at the same time, you get the benefit of the appreciated amount, without having to sell it. The charity can, if it wants, sell the stock without paying any capital gains taxes because registered nonprofits are tax exempt.

Charitable Rollovers. If you are older than 70 ½, you may donate up to $100,000 per year to charities directly from your IRA. This is known as a Qualified Charitable Distribution or a QCD. The QCD counts towards any Required Minimum Distributions (RMDs) that you need to take from your IRA annually. Under the recently passed SECURE Act, in the future RMDs must be taken by December 31, 2020, after the account owner celebrates their 72^nd birthday. Because RMDs are taxable income, they are taxed at ordinary income rates.

By donating through a QCD, you can support a charity, fulfill your RMD requirement and exclude the amount that you donate from your taxable income. For those who don’t need their RMDs, that’s a win-win situation.

Bequest by Will or Revocable Trust. A more traditional way to support a charity is to leave an amount in your will or revocable trust. The bequest is language in your will or trust that states the amount you want to leave to charity, clearly identifying the charity or charities you want to receive the funds and, if you want, stating the purpose for which you want the charity to use the funds. An important point: make sure that you use the legally accurate name of the charity to avoid any confusion. This is a common error that causes many problems for charities.

Consider also giving a donation that can be used for a charity’s “general purpose.” This lets the charity decide where to best allocate your donation, rather than tying the money to a specific program. If you choose to list a specific purpose, meet with the development office or the executive director at the charity to ensure that they are able to fulfill that desire. Otherwise, the charity may need to refuse the bequest.

Name a Charity as the Beneficiary of Retirement Accounts. If you decide to name the charity as a beneficiary on the account documents, be sure to use the legally correct name of the charity. The charity will be able to withdraw funds from the retirement account without paying taxes. People who receive funds from retirement accounts pay income tax rates on distributions, but charities do not. You may want to donate retirement account funds to charities, and non-taxable assets to heirs.

Charitable Remainder Trusts. This is a way to help the charity and provide for heirs. Your estate planning attorney would create a Charitable Remainder Trust (CRT) and name the CRT as the beneficiary of an IRA. A CRT is a “split interest trust,” where, for example, a person receives annual payments for the CRT for a set period of time. When the person’s interest in the CRT ends, the remaining funds are distributed to the charity of your choosing. There are very strict rules about how CRTs are structured, including the percentages that the charity must receive. An estate planning attorney will be able to help create this for you.

Reference: Kiplinger (March 2, 2020) “5 Ways to Incorporate Charitable Giving into Your Estate Plan”

For more information on tax planning, asset preservation and estate planning, please visit my estate planning website.

Try Gifting If You are Looking for an Advantage / Greenwich, CT & White Plains, NY

College support, birthdays or just plain giving has its distinct advantages.

Many people are considerate about gifting to help family, friends and society because there really is more to it than receiving a tax advantage, according to the New Hampshire Union Leader in “Lifetime (noncharitable) giving has many advantages—and not just for tax purposes.”

Lifetime giving means that you are more involved with giving than if your giving occurs after you have died. Perhaps the best part of gifting with warm hands is that you are able to enjoy seeing the recipient (donee) benefit from your gift. It’s a good feeling to see a person have his life enriched by your generosity.

It should also be noted that, sometimes, giving away something can be a way of liberating yourself. With less property, there’s less for you to manage, insure or provide upkeep.

If you die with no will, the intestacy laws of your state will determine who gets what. With a will, you have the opportunity to make your intentions known clearly. However, since you will not be alive, you won’t be able to see the actual transfer of property. A beneficiary might decide that they don’t want an asset. It is also possible that someone who always told you that he loved the painting in the foyer of your home, may decide to sell it, instead of keeping it.

Lifetime giving lets you react to changing circumstances and provides some control over how your assets are distributed.

After your death, your property and your estate may go through probate, which in some states can be a lengthy process. Lifetime giving also reduces the costs associated with probate and estate administration, because they won’t be included in your estate at the time of death. Assets that come out of the probate estate reduce the likelihood of estate creditors or dissatisfied heirs. Lifetime gifts are private, while probate is public.

However, there are also tax advantages. If your gifting program is structured correctly by an experienced estate planning attorney, income and estate taxes can be decreased. Generally, a gift is not taxable income to the donee. However, any income earned by the gift property or capital gain subsequent to the gift, is usually taxable. The donor holds the responsibility of paying state or federal transfer taxes imposed on the gift. There are four taxes to be aware of: the state gift tax, the state generation-skipping transfer tax, federal gift and estate taxes and the federal generation-skipping transfer tax.

Many people give because they want to support charitable causes or help friends and family enjoy a higher quality of life. The need to reduce the size of an estate to lower estate taxes is now less prominent, since the federal estate tax exemption is so high. It should be kept in mind that the new tax laws regarding federal estate taxes end in 2025. That may seem far away, but it will be here soon enough.

Another way to give is to help with college expenses. Any gift must be made directly to a qualified institution. Similarly, if you’d like to help a friend or family member with medical expenses, a gift needs to be made directly to the healthcare provider. Not only are these types of transfers exempt from federal gift and estate taxes, but they are outside of the $15,000 annual gift exclusion gift you can make to an individual in any given calendar year.

An estate planning attorney can advise you on creating an estate plan that fits your specific circumstances and can include lifetime giving.

Reference: New Hampshire Union Leader (April 7, 2019) “Lifetime (noncharitable) giving has many advantages—and not just for tax purposes”

For more information on asset preservation and estate planning, please visit my estate planning website.