When we look at the year 2018 the overall federal exception
doubled with Individuals being able to transfer a total of $11.18
million tax free. Now if we look at 2022 it has gone up to $ 12.06
million for individuals tax free and double that for couples. This
amount is set to overall expire in the year 2025. Therefore we
can determine that Bob and Ann will be able to make a tax-free
gift for all of there children and grandchildren overall. With the
calculations we have determined that each couple can obtain
$30,000 and all individuals will be able to obtain $15,000. If Bob
and Ann are able to potentially reduce their estate value all
together then they could potentially be able to dodge paying ant
estate taxes later on as well. If Bob and Ann decide that they
want to decrease their taxable estate by at least $660,000 every
year, then it would be best for them to gift each family member
accordingly. Therefore we can insinuate that this amount will
have no effects within the tax exception amounts.
We can also take a look at many potential advantages for
various gifting strategies related to Bob and Ann. One of these
methods would involve the use of a 529 College Savings Plan
which is known to be used for educational purposes. The money
used for the 529 College Savings Plan must be used for qualified
higher-education expenses that can include tuition, books as
well as room and board expenses. Also these funds can be used
for K-12 grade tuition of up to $10,000 a year. Bob and Ann could
also even just consider doing a one time gift for a total of five
years if needed of up to $75,000 tax-free with a total of $150,000
for each of her children and grandchildren. Bob and Ann finally
could even pay tuition directly for a grandchild that must be in
college , above the annual limit without and gift tax
consequences being involved. Therefore there is no limit for the
amount as long as it is paid directly to the institution.
Also if Bob and Ann decide they would like to gift there children
and grandchildren with one million dollars that will effectively
total $22 million. If you look above you can see I mentioned that
they are able to gift $30,000 for each child and grandchild but it is
important to note that those are not apart of the lifetime tax
exception. Therefore in 2022, the lifetime tax exception for a
couple would total $24.12 million which would leave Bob and
Ann with $2.12 million still gift tax free.
Also I believe that it will not be beneficial for Bob and Ann for
them to not participate within any estate planning strategies
before exceptionally leaving there estate divided up between the
children and grandchildren. This is because tax laws change
every year and could have consequences on them in the future.
Therefore it could be known that there grandchildren and
children could get stuck with paying estate taxes before
receiving their inheritance.
References
Cettina, T. (2023, March 3).Estate planning documents - when
you need them and why.Wells Fargo
Advisors.https://lifescapes.wellsfargoadvisors.com/estate-
planning-stages/CLA Connect).
Six Tax-Efficient Ways to Transfer Wealth to the
NextGeneration.https://www.claconnect.com/resources/articles/
2019/six-tax-efficient-ways-to-transfer-wealth-to-the-next-
generationFiduciary Trust. (n.d.).
Strategies for Making Gifts to Children and
Grandchildren.Retrieved on2023, March 3
fromhttps://www.fiduciarytrust.com/insights/commentary?comm
entaryPath=templatedata/gw-content/commentary/data/en-
us/en-us-ftci/trust-
estate/gifting_to_children_and_grandchildren&commentaryTyp
e=TRUST%20&%20ESTATE%20PLANNING
