Gift Tax Planning Strategies

Lifetime gifting often serves a direct role in planning your estate, particularly when it comes to wealth transfer tax planning. Remember: marital deduction planning and the creation of various types of trusts aren’t the only methods of excluding assets from your estate for estate tax purposes; the more you give away during your lifetime, the smaller your gross estate will be at your death. Because making gifts throughout your lifetime will both help you achieve wealth transfer goals and minimize your gross estate, it is important that gift tax exposure is recognized and planned for appropriately.

The qualified Estate Planning attorneys at Garg & Associates are available to discuss various strategies of lifetime gifting, as well as the impact of a gifting scheme from both a gift tax and an estate tax perspective. Remember that the estate tax is a progressive tax imposed on a decedent’s gross estate when such estate exceeds an applicable threshold. The gift tax is imposed on the lifetime transfer of wealth when the amount of a gift exceeds an applicable threshold. Both are considered “wealth transfer taxes,” meaning that they are imposed at the point that wealth is transferred from a decedent to beneficiaries, or from a donor to a donee.

Individual gifts made during your lifetime will escape taxation as long as they are made in amounts below your per-donee annual exclusion (currently $12,000.00).Some gifts, such as those made between U.S. citizen spouses, to a charity, or paid directly toward tuition or medical expenses, dodge the federal gift tax altogether, regardless of their amount. Other gifts will be permitted to take advantage of special valuation discounts allowed by the federal tax laws and regulations, meaning that these lesser-valued gifts will count less toward your annual exclusion amount.

The implementation of gift tax-saving trusts is also a topic to discuss with the Estate Planning attorneys at Garg & Associates, to determine if you would benefit from such vehicles. GRATs, or Grantor Retained Annuity Trusts, for example, are a popular mechanism among those wishing to implement lifetime gifting strategies. GRATS are designed to minimize gift tax liability in the transfer of estate assets to future generations. The methodology of a GRAT places as great a value as possible on the trust grantor’s retained interest (i.e., on the annuity interest). The idea behind this type of trust is the greater the retained interest, the less the value of the gifted remainder interest will be—and therefore the less the gifted value will be for gift tax purposes. While the mechanics might seem complex, the GRAT is a very useful structure in the gift planning arena. A GRAT can save significant wealth transfer taxes when executed properly.

If you are seeking more information on lifetime gifting and gift tax saving strategies, contact the Houston Estate Planning attorneys at Garg & Associates today.

We invite you to contact us for a consultation. Call Garg & Associates, PC at 281-362-2865 or complete our contact form.

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Garg & Associates, PC | 21 Waterway Avenue, Suite 300 | The Woodlands, Texas 77380 Please call 281-362-2865 | Fax: 866-743-4506
Serving The Woodlands, Spring, Houston, Conroe, Kingwood, Tomball, Cypress, Huntsville, Cleveland, Stafford, Montgomery County, Harris County, West Oaks, Memorial, Sugar
Land, River Oaks, Alief, Stafford, Missouri City, and Southwest Houston Texas.