Before you gift any portion of your estate to your heirs and beneficiaries, it is important to know the tax implications of gifting. With some careful strategy and planning, you can potentially gift your estate while avoiding estate taxes.
Florida’s gift tax exemption
Florida’s newest gift tax exemption is $19,000. What this means is that you can give someone an asset of up to $19,000 without having to file a gift tax return.
The $19,000 gift tax exemption applies per person. For example, if you have four children, you can give $19,000 to each child without having to file a gift tax return. If you are married, you can give up to $38,000 in cash.
When you give more than that, you will need to file a gift tax return. However, that does not mean you will pay taxes on the money. The federal government allows you to give up to a certain amount during your lifetime or through your estate without paying gift tax through the unified gift tax and estate tax exemption.
Additionally, Florida does not impose a gift tax or a separate estate or inheritance tax. However, any amount you give beyond the $19,000 will be deducted from your lifetime limit.
When creating your estate plan, you must consider whether you want to give your assets as gifts while you are still living or wait until you pass away and they are distributed through your estate.
Factors to consider
One major factor in this decision is often who needs the money and when. If a family member or loved one needs money right now for a major purchase, such as a home, or financial difficulties, such as needing to pay off credit card debt or medical bills, you may want to give the gifts right now.
A benefit of giving during your lifetime is seeing your loved ones use your gifts, but this could also be a drawback. Perhaps you give your child a financial gift to pay off their credit card debt and they squander it on something else instead.
One option to avoid this situation is to give the money directly to the debtor or institution that it is owed to. Giving gifts this way not only ensures that the gift goes where you intend but allows you to avoid the lifetime gift and estate tax exemption. Therefore, you can give as much as you want without worrying about gift or estate taxes.
Living trust
Another option is to set up a living trust. A living trust is a legal arrangement that allows you to put assets under the management of a trustee. Title to the assets is then transferred to the trust.
The assets can transfer from the trust to your beneficiaries after you pass away, according to the rules you have outlined in the trust agreement. Assets in the living trust do not need to go through probate when you pass away and are typically shielded from creditors.
Depending on how your trust is set up, you may be able to still access the assets while you are still living.
Gift and estate tax laws often change. Getting current information and advice is essential when creating a gifting strategy.
