People give gifts for holidays, birthday, and other special occasions. Sometimes gifts are given for no reason at all. However, gift-giving can be an important part of your estate plan.

Gift-Giving Strategies

You may want to give financial gifts to friends, loved ones, and family members for a number of reasons. For example, you:

  • might be able to reduce your estate’s tax bill;
  • can provide financial security for heirs now instead of later;
  • can give tax-advantaged gifts to minor heirs; and
  • will enjoy seeing gift recipients enjoy your gifts.

Gift-giving may seem simple, but there can be legal consequences.

Laws and Regulations Regarding Gifting

Fortunately, Alabama does not have an estate tax, inheritance tax, or gift tax at the state level. The federal government, however, does levy an estate tax against estates worth more than the current estate tax exemption. In 2019, the federal estate tax exemption increased to $11.4 million. People with estates that may be worth more than $11.4 million should consider discussing their situation with an estate planning lawyer. Some estate planning strategies are designed to help estates avoid paying federal estate taxes.

The Internal Revenue Service (IRS) also includes gift-giving guidelines for taxpayers. You may give up to $17,000 each to as many people as you want, every year, to reduce your estate’s worth. To avoid any tax or probate issues, be sure you talk to your attorney before opening your checkbook – or online bank account.

The Effect of Gift-Giving on Your Estate Plan

Chances are your estate falls well below $11.4 million. Gift-giving to reduce the potential value of your estate still may be beneficial to you. There’s no guarantee that Congress will not change the estate tax exemption in a few years.

Other parts of your estate plan may also be affected. For example, your Will may need to reflect the gifts you have given or, of course, you may want to make individual bequests in your Will. Beneficiary designations for insurance policies and financial accounts may need to reflect the strategies you are using in your estate plan.

Discuss Gift-Giving with Your Estate Planning Lawyer

An attorney with experience in gift-giving strategies can customize a plan that meets your goals. Attorney Bruce Adams assists clients like you with their estate planning matters. Call us at 256-237-3339 to schedule an appointment. We are located in Anniston, Alabama, but help clients in surrounding Calhoun, Cleburne, Etowah, and St. Clair Counties.