How to Minimize Taxes with Estate Planning and Gifting Options


A comprehensive estate plan can ensure that your hard earned assets are transferred efficiently to your heirs and can help you reduce taxes.  When you combine estate planning with gifting strategies, it can be a powerful combination that can yield many after tax benefits for you, your family, and your favorite charities.  Here are a few things to consider:

Reduce potential estate taxes by giving annually– You can give $11.7 million without estate tax liability in 2021.  Amounts over $11.7 million could result in estate tax as 40%.  When you gift each year, you see the benefits of your gifts during your lifetime, and it reduces the value of your estate.  

In 2021, the amount each taxpayer can gift is $15,000 without gift tax liability.  If you are married, you and your spouse can gift $30,000 to one individual.  For example, if you have two children and 3 grandchildren, you can give a total of $150,000 ($30,000 x 5).  

Know your Lifetime Gift Tax Exemption– Let’s suppose you are single and want to give more than $15,000 to a person in one year. You may use that extra amount against your Lifetime Gift Tax Exemption.  In 2021 each person has a lifetime gift tax exemption of $11.7 million.  Gifts above the annual exclusion limit are considered taxable gifts and require the filing of an IRA gift tax form, but these amounts are applied to the lifetime exemption.  You will not actually have to pay gift tax until your total lifetime gifts over the annual exemption are over $11.7 million (or the applicable limit at that time).  In addition, you can generally gift assets directly to charity or spouse without taxes.  

College gifting options– You can contribute to a 529 college savings plan with your annual $15,000 gift tax exclusion.  What is unique here is that you can lump 5 years’ worth of gifts into one year, $75,000 for single or $150,000 if married, as long as no additional gifts are made over that 5-year period.  

You can also make payment directly to a qualified institution for tuition or healthcare provider, for someone else’s behalf, and NOT be subject to gift tax.  

Using the unlimited marital deduction– You can generally leave an unlimited amount to a spouse without estate or gift tax.  However, special planning is required if you want to maintain each spouse’s $11.7 million lifetime exemption amount for estate tax purposes.  I highly recommend you use a qualified attorney to make sure you have the proper documents in place for your situation.  

Tax advantages of charitable gifts– Gifts to charities are generally not subject to gift taxes.  You may even get an INCOME tax deduction, in addition to reducing the taxable value of your estate.  

There are a variety of options to consider here.  You may be able to fund a Donor Advised Fund or a Charitable Remainder Trust with low-cost basis stock, pay no capital gain and get an income tax deduction.  A CRT may be able to generate income for the owner during their lifetime.  Each has its unique purpose.  Which is right for you depends on your situation.   

Feel free to contact us with any questions.  We are happy to help any way we can.  Click here to setup a 15 minute phone appointment

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.

This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction


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