In the ever-evolving landscape of wealth management, affluent Mineola estate owners choose to support their children and grandchildren financially during their lifetimes. While the desire to make a positive impact is evident, navigating the tax implications of such generosity can be complex. Fortunately, several strategies exist to facilitate tax-efficient giving, while maximizing the benefits for donors and recipients. Based on Kiplinger’s article, “Three Ways to Give to Your Kids Tax-Free While You’re Still Alive,” we explore three strategies that can maximize tax-free giving to consider in your estate planning.
One estate planning strategy for affluent Mineola families leverages possible tax breaks on capital gains. Beneficiaries of assets that increase in value have traditionally received a break if the IRS calculates capital gains tax based on the inherited value, not when the decedent purchased the asset. The inherited asset's higher valuation is considered a "stepped-up cost basis" and lowers capital gains tax on any increase in value.
You can give to your children during your lifetime and get capital gains tax breaks if the recipient's taxable income falls below certain thresholds. If a single child's taxable income is below $47,025 or a married child's is below $94,050, they may pay zero capital gains tax upon selling the asset. Note that these tax breaks apply to capital gains. Estate taxes are a different story.
The gift tax exclusion allows individuals and married couples to give money to a child and maximize tax efficiency. Individuals can contribute money to a child’s college education or the down payment on a home as a gift. In 2024, the exclusion amount is $18,000 per recipient or $36,000 for married couples engaging in split gifts. With the lifetime federal exclusion set at $13.61 million per person, most Mineola residents can engage in tax-free giving without exceeding their lifetime allowance.
Specific expenditures, such as educational or medical expenses and direct payments to institutions, are excluded from the annual gift limit and lifetime exclusion. This direct payment strategy allows donors to support significant financial obligations, such as college tuition or medical bills, without impacting their gifting allowances. Donors can provide meaningful support to their children and grandchildren while minimizing tax implications.
While maximizing tax-free giving is essential, assessing the broader impact of financial support on recipients is essential. By incorporating gifts into a comprehensive financial plan, donors can align their generosity with their financial objectives and ensure sustainable support for future generations. Learn more in our article: Do You Pay Taxes on Gifts From Parents?
Estate planning strategies for affluent Mineola families includes tax-efficient giving that allows parents to support their children and grandchildren. Implement gifting strategies and consider the broader financial impact to leave a lasting legacy and support loved ones. To learn more about how to create an estate plan that fits your family's unique financial goals, book a consultation with the Campbell Law Firm.
Reference: Kiplinger (April 10, 2024) “Three Ways to Give to Your Kids Tax-Free While You’re Still Alive,”
