The end of another year is approaching in Massachusetts. Thoughts may inadvertently turn to tax time but it can also be an excellent time for some proactive estate planning. The tax law affords one the opportunity to share a portion of one’s estate during a person’s lifetime without incurring a gift tax. It provides the opportunity for some generous gifting.
The law states that a person can gift up to $15,000 and not have to file a gift tax return. That is not for one gift of up to $15,000 but can be a per person amount and it also applies to one’s spouse. For example, if a married couple has two children who in turn have two children, each child and grandchild could receive $15,000 from each parent.
In addition, any amount that is gifted in such a way is subtracted from the value of one’s estate for estate tax purposes when a person passes away. The current federal estate tax exclusion number is $11.58 million for 2020. If one’s estate exceeds this amount and is thus subject to the federal estate tax, gifting some of one’s estate now has a two-fold benefit. One can see the benefits of one’s generosity while still here, and the individual can also potentially ease the tax burden on one’s family in the future.
Estate planning is rarely a pleasant task to take on in Massachusetts. Contemplating one’s mortality can be a sobering experience. Taking proactive action to provide for one’s loved ones and to ease what can be a difficult time in the future can provide a priceless gift in this holiday season.