Using Gifting to Minimize Estate Tax Liability

Gifting from your assets during your lifetime is the most common way to avoid estate tax liability after your death.  In Ohio, an estate above $338,333 is subject to estate taxes; an estate in excess of $3.5 million (for 2009) is also subject to federal estate taxes.  If your assets are above these levels, gifting is one estate-planning tool for you to consider.  Unfortunately, gifting and gift taxes are commonly misunderstood, and therefore gifting is underutilized in many cases.

Dispelling the Gift Tax Myth

There are often misconceptions about gifting and gift tax returns.  You may have heard that a donor is only permitted to give $13,000 per donee per year.  In reality, you can give more than $13,000 per donee per year; you simply need to file a gift tax return for any gifts made above that amount.  You can give up to a total of  $1 million in these “excess gifts” over the course of your lifetime, and owe no gift taxes.  Gift taxes are due only on the amount in excess of $1 million.  Note that the cumulative amount of excess gifting during your lifetime reduces the $3.5 million Federal estate tax exemption dollar for dollar at your death.

Gifting can be a very useful tool to reduce or avoid estate tax liability.  Thoughtful estate planning can save your heirs significantly.  Skillful titling of assets and asset transfer preparations can minimize estate taxes as well as income taxes for your heirs.  At Niehaus Law Office, LLC, we have been helping our clients with estate planning and administration since 1978 and have been preparing individual tax returns since 1976.  Our extensive estate and tax knowledge allow us to provide our clients with optimal advice for each person’s unique situation.