When you’re handling estate planning tasks, you might realize that your loved ones are going to be hit with a costly estate tax. Unfortunately, this is something that you’ll have to address very carefully since there are only certain ways to do this lawfully.
One of the specific issues that you have to be careful to watch for is the gift tax. There are limits to how much you can give to a single person or entity each year. If you go over this, the gift will be taxed. Currently, the limit is $12,000 per person per year. This means that you can give one person $12,000 in a year, and there isn’t a limit to how many people you can give gifts to per year.
If you’re married, your spouse can also give that same person $12,000 that year. Each gift you reduces the size of your estate, so your heirs might benefit from receiving some gifts from you while you’re still alive. Some other options that you might utilize include:
- Uniform transfer to minors
- Marital transfers
- Family limited partnership
- AB and QTIP trusts
- Private annuity
- Irrevocable life insurance trusts
- Charitable transfers
- Qualified family-owned business interest
- Special use real estate valuation
If you know that you need to reduce the size of your estate to help your loved ones avoid a hefty estate tax, you should work very closely with your estate planning professional. Finding one who is familiar with taxation as it related to an estate may be particularly helpful. This can help you to ensure that your loved ones get as much support as possible from your estate.