Estate Planning: Gifting to Heirs

As the holiday season is upon us and the tax year is coming to a close, it is a good time to consider making tax-advantaged gifts to your loved ones and heirs. There are many ways to do this, which can fit any budget, tax purpose and family need.

Annual Exclusion Gifts

In 2023, you can make gifts in the amount of $17,000 each to an unlimited number of beneficiaries, such as children and grandchildren, each calendar year. If you have a spouse, you can double that amount to $34,000 per beneficiary each calendar year. This gift is completely tax-free and does not count against your lifetime tax exemption amount. You can make gifts with any assets, including cash, stocks, bonds, even part ownership in real estate. Gifts of appreciable assets are removed from your taxable estate at current value and the future appreciation is removed as well. Keep in mind that, if your estate exceeds the estate tax exemption amount and you did not make such annual exclusion gifts, these same assets at your death would be reduced by the estate tax at the time of your death, which could shrink those very same assets by up to 50%.

If you have a taxable estate or are close to or above the exemption amount, it may make sense to make gifts above the annual exclusion amount. Regularly assess the current estate tax rate with your Cona Elder Law attorney to determine if it is cost effective to make gifts above the annual exclusion amount.

College Savings Plans and Medical Expenses

There are other ways to financially benefit your heirs without incurring gift or estate tax consequences, such as investing in education savings plans (529 plans). You may also make direct payments of tuition tax-free, provided you make the payment directly to the educational institution, including colleges and universities, as well as primary, secondary, and high schools. You may also pay medical expenses and health insurance costs on behalf of your heirs tax-free, again provided you pay the expenses directly to the provider.

Note that these transfers of assets are NOT free and clear for Medicaid eligibility purposes and will cause a penalty if made during a lookback period.  One size does not fit all so be sure you meet with your Cona Elder Law attorney to determine the best course of action for you and your family.

Contact our office at 631-390-5000 to schedule your appointment to review your tax and estate planning needs.

Jennifer B. Cona, Esq. is the Founder and Managing Partner of Cona Elder Law PLLC. Cona Elder Law is an award-winning law firm concentrating in the areas of elder law, estate planning, estate administration and litigation, and health care law. The firm has been ranked the #1 Elder Law Firm by Long Island Business News for eight consecutive years.