Estate Tax Avoidance Tip #1: Gifting | Estate Planning TV 009
In Washington State, there are two taxes that you are potentially facing. There’s a Washington State tax and the federal state tax. The Washington State tax starts at 2.129 million dollars and that includes the value of your home, the value of your bank accounts, the value of your investments and life insurance. So for a lot of people in the State of Washington, that’s relatively a small number particularly when you take account life insurance. At the federal level, it’s 5.48 million dollars. It’s not something a lot of people have to worry about.
One things to remember is that one tip can be used alongside another tip to exponentially decrease your tax liabilities.
The 2.129 million is not really an exemption necessarily. What it is is a gift allowance. You have the ability to give 2.129 million away to anybody that you want before you have to start paying estate taxes. That’s the big number. You can do that at one time. There is another gift exemption. Without eating into that 2.129 million dollars, you have the ability to give away $14,000 a year to as many people as you want. If you have 10 kids, you can give away $14,000 to each of them without having to eat into your 2.129 million gift exemption. If you’re married and you have 10 kids, then you can give $14,000 to each one of them. This can help to sort of minimize your estate. It can sort of keep your estate on hold depending on how much money you’re making every year.
Another thoughtful, interesting reason to gift is give you a sneak speak on how they will use the money when you’re gone. It give you an idea of what you might expect when you’re gone with the way that they will treat the money that you give them. This is important because it can really impact how you plan for the future.
You can gift $14,000 to as many people as you want. There’s no maximum number of people that you can gift to but if you go over $14,000 then you have to start claiming that on your tax forms. It starts eating in to that 2.129 million dollars. One thing to remember is that this $14,000 gift, you don’t have to pay tax on it, neither does the person receiving the gift.
Christopher Small is the owner of CMS Law Firm LLC a Seattle estate planning law firm. Click here for a free strategy session.
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