What is the simplest estate planning tool around? Gifting! Make substantial annual gifts now while you can control the funds with flexibility. Reap the benefits and fun of being with your heirs and others as they enjoy your generosity.
The amount you can gift per year to anyone, without incurring income taxes or gift taxes, is $13,000. (This limit was raised from $10,000 a few years ago and is scheduled to be adjusted for inflation in the future.) The recipients do not have to be non-profit organizations. Many individuals make gifts to children or grandchildren, but a relationship is not a requirement.
Let us look at a case. Suppose you are 55 and are lucky enough to have plenty of money to live on for the rest of your life. Will a return of 5% on your total estate be more than enough for your daily needs, including other current income? Then perhaps you are ready to take advantage of this benefit. You have saved diligently. You have invested well. Now it is time to reward yourself.
See the fruits of your labors being enjoyed now, as you stave off the "tax man." How does it work? Simple! Write a check (or re-title a stock or bond holding) worth up to the limit annually to as many individuals as you would like. In fact, couples can gift double together to each recipient annually … and the number of recipients is limited only by your means and desires.
If you want to give even more, and, of course, want to do it without affecting anyone's tax situation, consider paying tuition directly to your heir's educational institution. These amounts do not count against the annual limit. What a great back-to-school, graduation, or holiday gift!
Be aware that these gifts need an informational report to the Internal Revenue Service. You cannot go back and use this annual benefit if you forgot to do it last year. So, plan well. Remember, before year's end, to take advantage of this most simple estate planning tool.