What Makes $14,000 a Magic Number in Estate Planning?

Estate Planning and Gift Tax Returns – Knowing Your Numbers… 

Why is $14,000 a magic number in estate planning? Well, this is the amount of the current (2014-2015) tax exclusion, which means that anyone that gives away (or gifts) $14,000 or less to any one individual does not have to report the gift to the IRS. For those lucky people with an excess of funds, this can be a great way to ensure that your family and heirs get more of what might otherwise be their inheritance when you kick the bucket (hence, the IRS doesn’t take such a large percentage of your estate when you go).

This means someone with a decent amount of money could choose to gift $14,000 a year to one or more grandchildren. That way they–or their grandchildren–can avoid at least some of the hefty taxes that come along with the exchange of a rather large estate. These smaller gifts are made in their lifetime. 

If you gift more than $14,000 to any one person (other than your husband or wife) you will have to file a gift tax return (…in some cases this doesn’t necessarily mean that you’ll pay a gift tax: You only have to pay a tax if your reportable gifts total more than $5.43 million [figure from 2015] during your lifetime). 

If you have this kind of money to give, you can give this amount to as many people as you like. However, even if you’re wealthy, you need to be cautious about a few things before taking advantage of this magic number.

What You Need to Know:

If you think there is a chance that you will ever need to apply for Medicaid long-term care coverage, you should definitely consult a knowledgable elder law attorney before setting up any sort of gifting plan. Otherwise you may find that a gift you made to a child or grandchild could hurt your chances of getting Medicaid coverage for long-term care costs.

The IRS may not tax you if you stay mindful of the magic gifting number; however, IRS rules and Medicaid asset transfer rules are two separate entities: If you apply for Medicaid long term care coverage within 5 years of gifting, you may face stipulations or consequences when it comes to securing long term care in a nursing home. 

When Gifting: Plan Ahead, but Expect the Unexpected

You never know what life will bring. It’s important to make sure that you’re taken care of before you distribute your assets to loved ones. Make sure that you seek out an attorney that can help you navigate the multiple avenues of estate planning so that you can live with peace of mind and security. 

 

Heidi S. Webb Attorney at office

Heidi S. Webb Attorney at Law is an estate planning and small business attorney serving clients in Daytona Beach, Ormond Beach, Port Orange, and surrounding areas. Contact Heidi today for a free consultation: (386) 257-3332.

Law office located on the 3rd floor of the historic Kress building on Beach Street in Daytona (handicap accessible). 

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