Understanding Gift Tax Rules can help Tax-Efficient Giving

February 12, 2025

Many people give financial gifts to family members, friends, or charities, whether for milestone events, education, or estate planning purposes. While gifting is a generous act, certain gifts may trigger tax obligations. Understanding federal gift tax rules, annual exclusions and lifetime exemptions can help individuals structure their giving in the most tax-efficient manner.

What Is the Gift Tax?

The gift tax is a federal tax imposed on transfers of money or property made without receiving something of equal value in return. The person making the gift, not the recipient, is responsible for paying any applicable gift tax. However, most gifts fall within exemption limits, meaning few individuals owe taxes on their generosity.

How the Gift Tax Exclusion Works

As of 2025, individuals can give up to $19,000 per recipient per year without triggering gift tax reporting requirements. Married couples can combine their exclusions, allowing them to gift $38,000 per recipient tax-free.

For example, if a parent gives their child $19,000 in 2025, the gift is below the annual exclusion and does not need to be reported to the Internal Revenue Service (IRS). However, if the gift is $26,000, the excess $7,000 must be reported, though it may not necessarily result in tax owed.

Lifetime Gift Tax Exemption

In addition to the annual exclusion, individuals have a lifetime gift tax exemption, which allows them to give away a set amount over their lifetime without incurring taxes. In 2025, this exemption is $13.99 million per person (or $27.98 million for married couples).

If a gift exceeds the annual exclusion, the excess amount is deducted from the lifetime exemption. Only gifts that surpass this exemption trigger actual gift tax liability. Most people will never reach this limit, meaning they can give substantial amounts tax-free.

What Types of Gifts are Tax-Exempt?

Certain types of financial gifts are automatically exempt from gift tax rules, including:

Payments for Medical Expenses: Direct payments to medical providers for someone else’s healthcare are not considered taxable gifts.
Educational Tuition Payments: Direct tuition payments to a school or university (not including room and board) are exempt from gift tax.
Gifts to Spouses: Unlimited tax-free transfers can be made to a U.S. citizen spouse. Gifts to a non-citizen spouse have a lower annual exclusion limit ($190,000 in 2025).
Charitable Contributions: Donations to IRS-recognized charities are tax-deductible and do not count toward the gift tax exemption.

Reporting Large Gifts to the IRS

If a financial gift exceeds the annual exclusion, the giver must file IRS Form 709: U.S. Gift (and Generation-Skipping Transfer) Tax Return. Filing does not necessarily mean taxes are owed—it simply records the amount deducted from the lifetime exemption.

For example, if an individual gifts $30,000 to a child in 2025, the excess $11,000 is reported on Form 709. However, it is deducted from their $13.99 million lifetime exemption, leaving them with $13.979 million remaining. Taxes are only due if lifetime gifts surpass the exemption limit.

Tax Planning Strategies for Gifting

To maximize the benefits of financial gifts while minimizing tax exposure, consider these strategies:

Spread gifts over multiple years to take advantage of the annual exclusion each year.
Leverage direct tuition or medical payments to help loved ones without using up gift tax exclusions.
Utilize trusts for structured wealth transfers, such as irrevocable trusts for minor children or special needs beneficiaries.
Coordinate with an estate plan to gradually minimize estate tax liability by gifting assets.

The Role of an Estate Lawyer in Gifting Strategies

An estate planning attorney can help structure financial gifts to align with long-term wealth transfer goals while minimizing potential tax liabilities. Whether incorporating gifting into an estate plan or establishing trusts for heirs, professional guidance ensures compliance with IRS regulations.

Financial gifting allows individuals to share wealth, support loved ones and reduce potential estate taxes. By understanding gift tax rules and planning strategically, you can help structure tax-efficient giving that benefit both the giver and the recipient. If you would like to learn more about the gift tax, please visit our previous posts.

Reference: Kiplinger (Jan. 14th, 2025) “What is the Gift Tax Exclusion for 2024 and 2025?”

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Financial Blunders Grandparents Should Avoid with Grandchildren

February 5, 2025

Grandparents often find immense joy in supporting their grandchildren, whether by funding education, contributing to major milestones, or simply providing for day-to-day needs. While these gestures can create lasting memories, an article from the AARP explains that financial missteps can lead to unintended consequences. Grandparents can balance generosity with financial security by understanding potential pitfalls and adopting thoughtful strategies. There are some common financial blunders grandparents should avoid with grandchildren.

Overextending Finances and Other Common Financial Mistakes Grandparents Make

One of the most common errors grandparents make is giving more than they can afford. This often happens out of a desire to help with significant expenses, like college tuition or housing. While the intention is noble, overcommitting financially can jeopardize retirement savings and long-term stability. Grandparents must evaluate their financial capacity before making significant commitments. Consulting with a financial advisor can clarify how much they can comfortably give without endangering their financial health.

Co-Signing Loans

Co-signing a loan for a grandchild, whether for a car, education, or personal use, can have serious implications. If the grandchild is unable to make payments, the financial burden falls on the grandparent, potentially damaging their credit score or creating unexpected debt. It’s essential to understand the risks before co-signing any financial agreement. Alternatives, such as contributing smaller amounts directly toward the loan, can provide support without the same level of risk.

Giving Unequally Among Grandchildren

Favoritism, whether intentional or perceived, can strain family relationships. For instance, funding one grandchild’s college tuition while offering no support to others can lead to resentment or conflict. To avoid these issues, grandparents should strive for fairness, considering equitable ways to help all grandchildren. Transparency about financial decisions and the reasoning behind them can also reduce misunderstandings.

Ignoring Tax Implications

Generous gifts can sometimes lead to unintended tax consequences. In 2025, the IRS allows individuals to gift up to $19,000 annually per recipient without triggering gift tax reporting requirements. Exceeding this threshold may require filing a gift tax return or result in tax liabilities. Grandparents should understand these limits and plan their giving accordingly. Contributions to 529 college savings plans or medical expenses paid directly to providers are additional tax-efficient options.

Failing to Prioritize Estate Planning

Large gifts made without considering overall estate planning goals can disrupt long-term plans or unintentionally disinherit certain heirs. Without proper documentation, disputes can arise among family members. Grandparents should incorporate financial gifts into their broader estate plans. Working with an estate planning attorney ensures that gifts align with their goals and minimize potential conflicts.

To avoid financial missteps, grandparents can adopt these thoughtful strategies:

Set clear boundaries and determine how much you can give without compromising your financial security.
Plan equitable contributions to ensure fairness among grandchildren, while considering individual needs.
Focus on education by contributing to tax-advantaged accounts, like 529 plans.
Pay for specific expenses directly to avoid triggering gift tax complications.
Work with financial and legal professionals to develop a giving strategy that aligns with long-term goals.

The Importance of Communication

Open communication with family members is key to avoiding misunderstandings or conflicts. Discuss your intentions and limitations with both your children and grandchildren, ensuring that everyone understands your approach to financial support. These conversations can strengthen family bonds and provide clarity about your financial role.

Balancing Generosity with Stability

Supporting grandchildren financially can be one of the most fulfilling aspects of grandparenting. Grandparents can avoid financial blunders with grandchildren by implementing thoughtful strategies that can provide meaningful assistance, while safeguarding their financial future. A balanced approach ensures that your generosity strengthens family ties without creating financial or relational strain. If you would like to learn more about estate planning for older couples, please visit our previous posts.

Reference: AARP (Nov. 11, 2024) “The 5 Worst Mistakes Grandparents Can Make with Money”

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Self-Employed must take a Proactive Approach to Estate Planning

January 16, 2025

Freelancers and the self-employed must take a proactive approach to estate planning. These types of jobs operate without the safety nets provided by traditional employment. This independence brings freedom. However, it also adds complexity to financial and estate planning. From managing irregular income to protecting business assets, creating an estate plan ensures that your hard work is preserved and distributed according to your wishes.

Unlike salaried employees, freelancers often lack access to employer-sponsored benefits, such as life insurance, retirement plans, or disability coverage. Their business assets and personal finances are frequently intertwined, making careful planning essential to avoid unnecessary complications for heirs.

A well-crafted estate plan for freelancers addresses:

Transfer of business assets or intellectual property.
Continuity of income for dependents.
Minimization of taxes and legal hurdles.

Freelancers and the self-employed must create a plan that considers their unique financial circumstances and provides long-term security for loved ones.

Freelancers often rely on their business as their primary source of income. Without a plan, the value of that business could be lost upon their death. Key steps include:

Appointing a Successor: Identify someone to take over the business or handle its sale.
Creating a Buy-Sell Agreement: Outline how ownership interests will be transferred for partnerships or joint ventures.
Documenting Procedures: Maintain clear records and instructions to help successors understand ongoing operations or intellectual property management.

Freelancers often experience fluctuations in income, which can complicate traditional estate planning strategies. To account for this:

Establish a rainy-day fund to provide a financial buffer for your estate.
Work with an estate planning attorney to identify flexible asset protection strategies.
Consider annuities or investments that provide steady income streams for beneficiaries.

Unlike traditional employees, freelancers must set up their own retirement savings plans. Options include:

SEP IRAs or Solo 401(k)s: Tax-advantaged accounts tailored for self-employed individuals.
Roth IRAs: Flexible savings accounts that grow tax-free, offering greater liquidity for heirs.

Ensuring that retirement savings are properly designated to beneficiaries avoids complications later.

The self-employed often own valuable digital assets like intellectual property, domain names, or online portfolios. These assets must be included in your estate plan to ensure seamless transfer. Create an inventory of:

Login credentials for key accounts.
Ownership documentation for websites or digital products.
Instructions for transferring or licensing intellectual property.

Many self-employed generate income from intellectual property, such as writing, artwork, or designs. An estate plan should specify how copyrights, patents, or trademarks are managed after death. This may include:

Assigning ownership to heirs or beneficiaries.
Creating trusts to manage royalty payments.
Licensing or selling rights to preserve income streams.

The first step to creating an estate plan is drafting a will that distributes assets, business interests and personal property according to your wishes. Without one, state laws determine asset distribution, which can result in unintended consequences. However, there’s much more to an estate plan than just making a will.

Establish Powers of Attorney

Freelancers should designate a trusted person to handle financial and healthcare decisions, if they become incapacitated. Powers of attorney ensure continuity in managing personal and business affairs during emergencies.

Consider a Living Trust

A living trust can help freelancers avoid probate and ensure that assets are distributed efficiently. Trusts are beneficial for managing complex assets, like intellectual property or business income.

Secure Life Insurance

Life insurance provides a safety net for freelancers with dependents by replacing lost income and covering future expenses. Policies should be aligned with your estate plan to ensure that benefits are directed appropriately.

Reach Out to an Estate Planning Attorney

Freelancers should consult estate planning attorneys and financial/tax advisors to create a plan that addresses their unique circumstances. Regular reviews ensure that the plan evolves alongside income, assets, or family structure changes.

Freelancers and the self-employed must take a proactive approach to estate planning. You can ensure your hard-earned legacy benefits your loved ones by addressing business continuity, income fluctuations and digital assets. An estate plan tailored to your needs secures your financial future and provides peace of mind, knowing that your assets and values will be protected. If you would like to learn more about planning for the self-employed, please visit our previous posts.

Reference: American College of Trust and Estate Counsel (ACTEC) (Oct. 19, 2023) “Estate Planning for Freelancers and the Gig Economy”

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The Estate of The Union Season 3|Episode 11 is out now!

January 7, 2025

The Estate of The Union Season 3|Episode 11 is out now! We all make mistakes, and usually they aren’t fatal. Unfortunately, when someone dies, a mistake made in an estate plan can be!

In this edition of The Estate of the Union, Phillip Arendall and Brad Wiewel dissect mistakes that Phillip has seen people make in the probate process. Phillip is the Associate Director of our After Life Care Division and he brings his great insight (and sense of humor) to help analyze the foibles and pitfalls he has observed in that role. We hope you enjoy listening to these cautionary tales.

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 3|Episode 11 is out now! The episode can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the links to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.

Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.

Creating a Comprehensive Estate Plan for Cryptocurrency is Essential

November 18, 2024

Creating a comprehensive estate plan for cryptocurrency is essential. Cryptocurrency is no longer just for tech enthusiasts. With the growing popularity of Bitcoin, Ethereum and other digital currencies, estate planning now involves accounting for these unique assets. Cryptocurrency brings new challenges, unlike traditional investments, such as real estate or bank accounts. There’s no customer service to help recover your funds, and if you don’t have the proper protection in place, your digital wealth could be lost forever.

One of the main differences with cryptocurrency is how it’s stored. Digital wallets protect your crypto holdings, and private keys control access to those wallets. A common phrase in the crypto world is “Not my key, not my coin,” which means that you don’t have access to the funds if you don’t have the private key.

If you don’t create a secure plan to transfer these keys to your beneficiaries, your cryptocurrency could be lost forever after your passing. Imagine losing a loved one and knowing they invested in Bitcoin without knowing where to find it or how to access it. There are no bank statements or account numbers to check, and without a clear estate plan, their digital wealth may disappear for good.

According to ACTEC, you must establish a secure plan for transferring these digital assets. One option is to use a third-party custodian to manage and store your cryptocurrency’s private keys. This minimizes the risk of losing your digital wealth through theft or mismanagement.

Some people prefer to store their private keys on physical items like a metal plate or a secure USB drive. While this method gives you direct control, keeping these items safe and ensuring that your heirs know where to find them is crucial. If these physical keys are lost, so is your crypto.

Another approach is to transfer your cryptocurrency into a corporate entity. This can simplify managing and passing down your crypto holdings, reducing the burden on your heirs to figure out how to handle the technical aspects of private keys.

Cryptocurrency is decentralized, which means there’s no central authority or institution to recover your assets if things go wrong. If you don’t create a clear plan for your crypto, it can easily be lost forever, leaving your family with nothing.

Creating a comprehensive estate plan for cryptocurrency is essential. This plan should clearly outline where your private keys are stored, how to access them and who will manage them after you’re gone.

If you’ve named a fiduciary, such as an executor or trustee, to manage your cryptocurrency, they may face unique difficulties. Cryptocurrencies are known for their volatility, with values fluctuating rapidly. Most fiduciaries are tasked with preserving the value of assets, and managing such volatile investments can be particularly challenging.

There’s also the issue of security. Fiduciaries may not be equipped to handle cryptocurrency’s technical requirements. They could accidentally lose access to these assets if unfamiliar with how digital wallets and private keys work. Selecting a fiduciary who understands these complexities or can seek help from those experienced in cryptocurrency management is essential.

Regarding taxes, the IRS treats cryptocurrency like any other property. You’ll owe capital gains tax if you sell your cryptocurrency for more than you paid. If you’ve held the cryptocurrency for over a year, you’ll pay long-term capital gains tax, which generally has a lower rate.

Cryptocurrency also plays a role in estate and gift taxes. Timing is essential here. If you transfer your crypto during a market downturn, you could lower the tax burden on your estate. Once the value goes back up, your heirs will benefit from the appreciation without the estate being taxed on the total amount.

Without a detailed estate plan, your cryptocurrency could be lost, mismanaged, or subject to excessive taxes. As digital assets become more common, it’s essential to account for them in your estate plan, just like any other investment. Estate planning lawyers can help you navigate these digital challenges and ensure that your cryptocurrency is adequately passed down to your heirs.

Don’t wait until it’s too late to secure your cryptocurrency. Speak with an estate planning lawyer today to create a solid plan for passing down your digital wealth. If you would like to learn more about managing cryptocurrency in your estate planning, please visit our previous posts.

Key Takeaways:

Protect your cryptocurrency: Digital wealth could be lost forever without proper estate planning.
Secure transfer of assets: Create a clear plan to ensure that your loved ones can access your cryptocurrency after your passing.
Reduce tax burden: Plan strategically to minimize capital gains and transfer taxes on your cryptocurrency.
Choose the right fiduciary: Select someone knowledgeable about cryptocurrency to manage your digital assets securely.

Reference: The American College of Trust and Estate Counsel (ACTEC) (Sep. 8, 2022) “Understanding Cryptocurrency in Estate Planning”

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Family Wealth Discussions are Critical to Proper Planning

October 8, 2024

Family wealth discussions are critical to proper planning. It can be tricky to talk about money with your family. Whether it’s financial planning, wealth management, or future inheritance, many people feel uncomfortable addressing the topic.

Before diving into how to have these conversations, it’s essential to understand why they’re often avoided. Many families avoid discussing money because it brings up complicated emotions, such as embarrassment, guilt, or shame.

Parents might hesitate to discuss their wealth with children, fearing it could affect their values or ambition. Conversely, adult children may avoid asking their parents about their finances for fear of overstepping boundaries.

Understanding these emotional barriers is the first step to overcoming them. The key is approaching the conversation with sensitivity and openness, focusing on long-term goals rather than current financial details.

Talking to your children about family wealth can be as challenging as speaking with parents. Many parents fear sharing too much information about money will affect their children’s work ethic or sense of responsibility.

However, having open conversations about money can help your children develop a healthy understanding of financial responsibility and family values. Start by discussing what money means to your family—why you’ve worked hard to earn it, what goals you have for it and what responsibilities come with managing it.

Rather than delivering a lecture, ask your children questions that encourage them to think about wealth and responsibility. You might ask, “What does it mean to be wealthy?” or “Why do you think financial planning is important?”

Approaching a conversation about money with aging parents can be intimidating. However, handling it with care is important. Rather than diving straight into numbers and documents, ease into the discussion by asking them about their thoughts on long-term care, retirement and other financial concerns.

Frame the conversation around ensuring that their wishes are respected. For example, you might say, “I want to make sure we’re all prepared in case anything happens and that your wishes are honored.”

Having a general idea of their financial situation and being prepared can help guide the conversation. Consider whether they have a will, a plan for long-term care, or any trusts. However, remember that the focus should be on understanding their desires and values, not just the details of their finances.

Family wealth discussions are more than just talking about dollar amounts; they are about critical to proper planning. It ensures everyone understands the values and goals behind the money. Talking openly with your family about finances can relieve stress, align expectations and ensure that everyone’s values are respected.

If you are unsure how to begin these critical conversations, consider seeking professional guidance. An estate plan can provide peace of mind for you and your family. If you would like to learn more about passing on wealth to future generations, please visit our previous posts.

Reference: Morgan Stanley (2018) “How to Have Meaningful Family Conversations About Money”

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Unique Challenges to Estate Planning for Non-Citizens with U.S. Assets

October 2, 2024

There are unique challenges to estate planning for non-citizens with U.S. assets. Non-citizens’ estate planning isn’t something that all estate lawyers are ready to handle. However, avoiding an excess tax burden is important. However, the right help can drastically reduce your tax burden and increase what you leave behind to loved ones.

One of the most important factors to consider regarding estate planning for non-citizens is residency status. The U.S. estate tax laws apply differently to residents and non-residents. Guardian Life shares that U.S. citizens and residents are entitled to a significant estate tax exemption—currently set at $13,610,000 for 2024.

However, non-residents with U.S. assets face a much smaller exemption of just $60,000. This stark difference means that non-citizens may be subject to high estate taxes, potentially up to 40% on assets exceeding the $60,000 threshold.

Residency status is a critical element in determining estate tax obligations. The Internal Revenue Service (IRS) uses the concept of “domicile” to decide who qualifies for the higher exemption. A person is considered domiciled in the U.S. if they live there and intend to remain permanently. Non-citizens who do not meet these criteria are considered non-residents and are subject to the lower exemption.

For example, someone living in the U.S. on a non-resident visa might still be considered domiciled for estate tax purposes. This contrasts with income tax rules, which would still treat them as a non-resident.

There are several strategies that non-citizens can employ to minimize their U.S. estate tax obligations:

Gifting Assets During Lifetime: One effective way to reduce estate taxes is by gifting assets while the donor is still alive. The IRS allows an annual exclusion for gifts up to $17,000 per recipient without any tax implications. This strategy can help decrease the value of the estate subject to tax upon death.
Leveraging Estate Tax Treaties: The U.S. has estate tax treaties with several countries, providing more favorable exemptions for residents of those countries. These treaties can significantly reduce estate tax obligations for non-citizens, making it crucial to understand which countries have such agreements with the U.S.
Utilizing Life Insurance: Life insurance can be a powerful tool in estate planning for non-citizens. Life insurance payouts are generally exempt from U.S. estate taxes, making them an attractive option for providing liquidity to cover any potential estate taxes without selling off other assets.

Given the complexities of U.S. estate taxes for non-citizens, seeking advice from experienced estate planning professionals who understand U.S. tax law and international estate planning is crucial. This includes not only tax attorneys but also financial advisors who are familiar with cross-border tax issues. A well-crafted estate plan can ensure that your assets are protected, and your family’s financial future is secure.

There are unique challenges to estate planning for non-citizens with U.S. assets. If you’re a non-citizen with U.S. assets, the tax implications can be significant. However, with the right planning, they don’t have to be. If you would like to learn more about planning for non-citizens with US assets, please visit our previous posts.

Reference: Guardian Life (Aug. 28, 2024) “US estate tax strategies for noncitizens and nonresidents with US assets”

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Women should Plan for a Second Retirement

September 23, 2024

Many spouses design their retirement finances and estate plans with their spouses. However, planning for the second phase of retirement and estate plans also needs to be done. Women should plan for a second retirement. When the first spouse dies, the surviving spouse would be well served by a plan for the “second retirement,” as explored in a recent article from Nasdaq, “I’m a Financial Expert: 7 Ways Ever Woman Can Prepare for a ‘Second Retirement.’”

In 2021, data from the U.S. Census Bureau shows that 30% of all older women were widows. There were also more than three times as many widows as widowers.

How do you plan? It depends on your age and financial situation. For instance, becoming a widow in your 60s is very different from becoming widowed in your 80s. If your network of friends and family was through your spouse, this may also change dramatically after their death.

The most important question is what the household income will be upon losing the first spouse. This must be considered if the decedent had a pension, annuity, or other income source that stopped upon their death. A surviving spouse can’t claim a deceased spouse’s Social Security benefits in addition to their own. You can only receive one of two benefits—either your retirement or survivor benefit.

Some pensions end upon the account owner’s death, while some allow for survivor benefits. These are usually a percentage of the original amount, or they may offer a lump sum payment.

Living costs will change when the first spouse dies. The surviving spouse may be able to move to a smaller home or sell a second car. However, certain costs will go away. Meanwhile, other costs may occur, like one-time taxes on inherited IRAs and taxes on the sale of property and vehicles. Losing the spouse might mean some services, like home maintenance, will need to be paid for.

The death of a spouse will incur certain legal and administrative costs. If there was no will, probate is expensive and will be necessary. An estate planning attorney may be needed to help settle an estate if there was no will, while costs will be less if a will and trusts were created before the spouse died.

Major changes in circumstances like the death of a spouse can throw even the highest functioning people into a difficult emotional state. Women should plan for a second retirement that will help make the transition into their new life easier, or at least as easy as possible.

Speak frankly with an estate planning attorney about revising your estate planning documents and preparing for the second retirement. There will be more than enough to deal with at the time; it will be better if planning can be done in advance. If you would like to learn more about retirement planning for women, please visit our previous posts.

Reference: Nasdaq (August 17, 2024) “I’m a Financial Expert: 7 Ways Ever Woman Can Prepare for a ‘Second Retirement’”

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If you are Leaving Property Behind, Consider a Land Trust

July 22, 2024

Estate planning can be complex. However, understanding the available tools can make it easier to protect your assets and provide for your beneficiaries. If you are leaving property behind, consider a land trust.

A land trust is a legal agreement where one party (the trustee) holds the title to the property for the benefit of another party (the beneficiary). This setup can offer privacy, ease of transfer and protection from creditors.

Land trusts offer several benefits:

Privacy: The property owner’s name isn’t on public records.
Control: The beneficiary can direct how the property is managed.
Protection: It can shield assets from certain legal actions.

A land trust can name virtually anyone as a beneficiary, including individuals, businesses and even other trusts. This flexibility makes land trusts a valuable tool for personalized estate planning strategies. Almost any type of real estate can be placed in a land trust. The eligible real estate types include residential homes, commercial buildings, farmland and vacant land.

Creating a land trust involves several steps:

Consult an Attorney: Get professional advice to ensure that a land trust fits your needs.
Draft the Trust Agreement: Outline the terms, including who will be the trustee and beneficiaries.
Transfer the Property: Deed the property to the trustee.

When Mr. and Mrs. Wilson decided to buy a vacation home, they wanted to keep their ownership private and ensure that the property would easily pass to their children. They opted for a land trust. The trust kept their names off public records, providing the privacy they desired. When Mr. Wilson faced a personal lawsuit, the vacation home was protected because it was held in the trust. Their children, named as beneficiaries, will smoothly inherit the property since it will avoid probate.

If you value privacy and have property, a land trust might be right for you. It’s especially useful for those who own multiple properties or wish to keep their ownership details confidential.

A land trust could be the solution if you want to protect your privacy, shield your property from creditors, or ensure a smooth transfer to your beneficiaries. It offers flexibility and control, making it a valuable tool in estate planning.

Planning your estate involves making important decisions about your assets and beneficiaries. If you are leaving property to your loved ones, consider a land trust as a valuable tool to leverage. If you would like to learn more about different types of trusts, please visit our previous posts.

Reference: Investopedia (April11, 2024) “Land Trust: What It Is, How It Works, Types, and Examples”

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Estate Planning with Annuities can be Complex

July 15, 2024

Estate planning can seem daunting. If you’re new to it, you have to learn about power of attorneys, trusts and much more. However, this effort can pay off many times over for you and your loved ones. Once you have a handle on the basics, you can start incorporating advanced strategies into your estate planning such as annuities. Nerdwallet makes the case that having good estate planning is important, and annuities are a vital tool to consider. Estate planning with annuities can be complex.

Annuities are insurance contracts that offer a series of payments over time. These contracts can pay out for a set period or the rest of your life. People often use them to manage retirement income.

Annuities have two phases. An accumulation phase is where you contribute money to the fund, and a withdrawal phase is where the contract pays out. Leaving your money in an annuity during the accumulation phase gives it room to grow tax deferred.

Annuities offer income security, tax advantages and legacy planning opportunities. Not only can you fund your retirement, but you can ensure a steady income stream for your beneficiaries. Annuities are a flexible tool to hedge against volatile markets and achieve financial security.

One of the primary reasons to include annuities in your estate plan is to provide for your heirs. According to Charles Schwab, there are three strategies you can consider during the accumulation phase:

Cash out your annuity if you’re at the end of its surrender period, though be aware of potential charges and taxes. This option provides immediate liquidity, which can be useful for other estate planning needs. However, you may suffer fees or tax penalties related to the early withdrawal.

Moving ownership to a non-grantor irrevocable trust will remove your annuity from your estate to benefit your heirs. This strategy can protect the annuity’s value from creditors and reduce estate taxes.

Make periodic withdrawals during the accumulation phase to take advantage of favorable tax treatment. Regular withdrawals can help you manage your income and tax liabilities more effectively and provide funds for other investments or expenses. This approach allows you to access the annuity’s value without triggering large tax penalties.

Once your annuity enters the payment phase, you have different options to support your estate planning goals:

Annual Gifts to Heirs: Make annual gifts using annuity distributions. This will reduce your taxable estate, benefit your loved ones and comply with annual gift restrictions.
Purchase Life Insurance: Use payouts to fund life insurance premiums. By setting up one of these policies, you can provide a tax-free inheritance for your beneficiaries.
Charitable Donations: Donate annuity payments to reduce taxable income and support charitable causes.
Reinvestment: Reinvest annuity payments into other financial instruments to continue growing your estate’s value.

Estate planning with annuities can be complex. However, you don’t have to navigate it alone.

Key Takeaways

Income Security: Annuities provide a steady income stream, ensuring financial stability during retirement and for your beneficiaries.
Tax Advantages: Annuities allow contributions to grow tax-deferred, and strategic payouts minimize taxable income.
Legacy Planning: Transferring annuities to a trust or using them to purchase life insurance protects your estate from taxes and ensures that your heirs benefit.
Flexibility: Options like annual gifts, charitable donations and trust transfers offer diverse ways to include annuities in your estate plan.

Reference: Nerdwallet (Dec. 21, 2022) “Annuities: What They Are and How They Work – NerdWallet” and Charles Schwab (Nov. 17, 2023) “5 Ways to Use Annuities in Your Estate Plan”

If you would like to learn more about annuity planning, please visit our previous posts.

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Category: Estate Tax

Understanding Gift Tax Rules can help Tax-Efficient Giving

Financial Blunders Grandparents Should Avoid with Grandchildren

Self-Employed must take a Proactive Approach to Estate Planning

The Estate of The Union Season 3|Episode 11 is out now!

Creating a Comprehensive Estate Plan for Cryptocurrency is Essential

Family Wealth Discussions are Critical to Proper Planning

Unique Challenges to Estate Planning for Non-Citizens with U.S. Assets

Women should Plan for a Second Retirement

If you are Leaving Property Behind, Consider a Land Trust

Estate Planning with Annuities can be Complex

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