Help Center » Estate Planning
Any property or assets given as a gift, including money, are subject to the federal gift tax. However, there are many exceptions. Here are some ways you can transfer assets without incurring gift taxes:
If you make contributions to a Section 529 college savings plan or prepaid tuition plan on behalf of another person, you can contribute up to five years of annual exclusion gifts, or $70,000, in a single year ($140,000 if you're married), provided that you make the proper election on a timely filed gift tax return. If the election is made, then any additional gifts over the annual exclusion amount to that individual during the five-year period will be subject to gift tax. If you die before the end of the five-year period, a prorated portion of your gift will be subject to estate tax.
Even if you make a taxable gift, you don't have to pay tax until you exhaust your gift tax exemption amount. This exemption currently allows for $5.25 million of taxable gifts to be made during your lifetime before a tax payment is required.
You should consult with your tax advisor so that your overall circumstances can be taken into consideration and that you're properly reporting the gifts.
Under current law, the amount of assets you can pass after your death without incurring estate tax (known as the estate tax exemption amount) varies depending upon the year of your death.
Estate tax exemption amounts
* Executors of estates for decedents who died in 2010 could elect out of the new estate tax regime so that no estate tax was due, but the modified carry-over basis rules as originally enacted by the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") would apply.
** This amount will be adjusted for inflation annually.
The estate tax exemption amount is reduced dollar-for-dollar if you've used all or part of the $5.25 million gift tax exemption during your lifetime.
Keep in mind that many states also impose estate and inheritance taxes.
There are many good reasons, unrelated to taxes, for setting up a trust while you're alive. Such trusts are commonly referred to as living trusts or revocable trusts.
There are many good reasons, not all related to taxes, for having a trust created upon your death. These trusts may be created through a will or a living trust.
A trust can be designed in many ways. Please be sure to consult with a qualified estate planning attorney to help ensure that your trusts are properly designed and that your goals are being accomplished.
Trustees generally will be responsible for, among other things, investing and managing the trust's assets, distributing the assets in accordance with the terms of the trust, keeping accurate records, and filing all necessary tax returns. Your trustees should be individuals or financial institutions that you trust. Keep in mind that you could have co-trustees serving, and if necessary, your trustees can hire expertise (e.g. investment, legal, and/or tax advice) to assist them in performing their fiduciary duties.
Prioritize your goals and objectives when thinking about who your trustees should be. For example, is it important that your trustee understand you and your family members/beneficiaries in a personal way? If so, having a close family member or friend serve as an individual trustee may be important. Is an objective trustee important when decisions are made about how and when assets are to be distributed? If so, a corporate trustee or an independent individual trustee may be appropriate.
Choosing trustees isn't always easy. If you're naming individuals, be sure to speak with them ahead of time to help ensure that they're comfortable with the responsibilities you are asking them to undertake. If you're using an independent trustee, especially in the case of corporate trustees, make sure you understand their investment philosophy, fee structures, and method for reviewing and deciding upon distribution requests from a beneficiary.
The following are some of the responsibilities required of a trustee: