Strategic Gifting Can Help Build and Preserve Your Wealth

Strategic gifting allows people to pass along a limited amount of private wealth annually without incurring taxes. The founding attorneys at Shore, McKinley, Conger & Jolley, LLP, serving clients in the Stockton, CA, area, have been involved in wealth estate planning for more than two decades. To protect your assets and your financial well-being, allow us to partner with you as you undertake actions of strategic gifting private wealth.  

Wrapped present exchanging hands

An attorney can ensure that your gift-giving strategy is in yours and your family's best interests.

What Is a Gift Tax Exclusion?

Every April, Americans wait anxiously to learn what, if any, their additional tax liability will be. The goal of most is to walk away even and owe no more than has been withheld from their paycheck year round, or get a refund. In order to minimize taxes, taxpayers look to deductions and other tax breaks. One way to decrease tax liability is to gift funds, on an annual basis. If you are able to do this, there is an exclusion that applies and allows you to make these gifts tax free. The amount changes from time to time, for 2017 the gift exemption is $14,000, meaning a taxpayer can gift that amount without paying taxes on the funds. 

Strategic gifting private wealth is a smart way to plan a financial future. Competent legal advice maximizes savings.

In some cases the gift tax is specified, and in those cases a closer look is required before taking action:

  • Education: The IRS allows for an exception to the taxation of financial gifts above the annual exclusion amount when the funds are for educational purposes. Any money given to a friend or family member for payment of college tuition is exempt from taxation.
  • Healthcare benefits: Payments directly to a medical facility or institution for the medical expenses of a qualifying recipient are not subject to taxation. This is also for an amount over and above the annual exemption amount of $14,000.00.

Proper planning and use of these tax breaks will lower tax liability, and provide the financial gifts intended by the gifter.

Lifetime Exemptions from Federal Gift Taxes

A basic understanding of this tax mechanism is needed if you make enough money to gift funds to friends or relatives, and the first concept to make clear is that it is the gift giver that pays any tax and not the recipient. Because of this scheme, it is critical to find ways to lower the amount of tax and understand the limitations during the lifetime of the gifter. The current lifetime limit on gifts is $5.49 million, and for a married couple this amount doubles because each spouse is entitled to the exemption. 

Benefits of a Trust for Transfers of Assets

Many families work hard to preserve wealth for future generations. This can be done by establishing a trust. A trust provides financial benefits and helps safeguard assets in several ways:

  • A trust designed for many generations can save the beneficiaries thousands or millions because when it is done properly, certain trusts are not subject to estate or gift taxes.
  • Gifts may be made to the trust and result in substantial tax savings as well as grow the wealth within the trust. 
  • Many assets included in a trust are outside the reach of creditors, thus giving protection to the funds and allowing the trust assets to be used for many generations.
  • When conditions of use are placed upon trust assets, those that fund the trust can rest easy knowing the beneficiaries will be required to act (or refrain from acting) in a certain way. This type of trust can promote the continued education of the beneficiary, or ensure family funds stay in the family.

Setting up a trust must be done with an eye towards the intended result. Our job is to take an in-depth look at your long-term goals, and develop a plan that meets your needs. 

Contact Us for Help with Strategic Gifting Private Wealth

If you need help planning for your financial future, contact Shore, McKinley, Conger & Jolley, LLP, online for help. You can also call the firm at (916) 307-6880.