End of Year Gifts: Avoiding the Mistakes and Maximizing the Benefits to Your Children, Grandchildren and Heirs

David M. Frees III  Wills, Trusts, and Estates
Law Offices:  Phoenixville, Paoli,
and West Chester - Pennsylvania

Many clients wonder about making gifts for estate planning purposes at this time of year.  This article will review some of the most common mistakes people make with respect to end of year and holiday estate planning gifts and how to avoid them. 

And, unless you're very careful, you might make one of these gifting mistakes that can really cost your family. 

Mistake Number One: The single biggest estate planning gift mistake?  Not making gifts when you can and should.  If you find yourself in the position of saving more than you spend each year during retirement, and, your estate exceeds the federal estate tax limit, then you might want to consider gifting to your heirs.  Since the top marginal federal estate tax rate is scheduled to return to 55% absent Congressional action, gifting can result in a major benefit to your heirs.

Mistake Number Two:  People also make fewer gifts than they can.  Currently, everyone can make gifts or $14,000.00 per year.  However, many people still believe that the old $10,000.00 number still applies.  Check each year, becasue the amount does adjust for inflation.

Mistake Number Three:  Married couples can also make double the gift amount by using both annual gift tax exclusions.  Many people believe that unless each spouse is able to make a separate gift, then they are limited to one.  However, if one spouse is able to make a gift of $28,000.00 the other spouse can join in this gift by signing a "split gift tax" return.

Mistake Number Four:  Gifting at the end of the year so that the check isn't cashed.  This is a big one!  If you are giving cash, then it can be gifted up to the end of the year.  However, if you give a check, it must be cashed before December 31st.  This can result in you missing the entire year's gift tax exclusion so be careful and consider making gifts earlier in the year so that the receipient gets the investment growth on the asset during the year and it is out of your estate.

Mistake Number Five:  Failure to Leverage gifts is a serious problem.  What do I mean?  For example, you can give a gift of $14,000.00 of cash or you can give a gift of $14,000.00 of a strong but under valued stock.  If that stock rebounds in value to $30,000.00 then you moved much more value from your estate.

There are many more gifting strategies and tactics but make sure that you consider these important gifting mistakes before the end of the year and before you make gifts to your children and/or grandchildren.

Remember to leave your questions in the comment area below.

If you need an appointment or telephone conference, call 610-933-8069 and ask for David M. Frees III (or his assistant can help you schedule it).

David M. Frees, III
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