You may watch television shows or movies that depict someone who is accused of a crime refusing to make any statements before he or she has had the opportunity to speak to an attorney. These individuals want to make sure that they have legal representation before they do or say anything that could be detrimental to their case.
Along these lines, even if you are a law abiding citizen, you still have to recognize the need for legal counsel before you take action that impacts your financial security. There are a multitude of complexities in the tax code that the average layperson may not be aware of. You can wind up costing your family a great deal of money if you go forward without any legal advice.
One thing to take into consideration is the existence of the gift tax. Under the tax code, gift giving is a taxable event, fair or not. A lot of people would say that it’s not fair because of the fact that it is an instance of double taxation.
After all, if you were to save a particular sum of money over a number of years out of your after-tax earnings and then give it to your son as a gift these assets would have already been taxed. In spite of this, the reality is that the gift tax would be applicable.
There is lifetime gift exemption, but it is unified with the estate tax exclusion. So if you used up all of your unified exemption giving gifts while you are alive the entirety of your estate would be subject to the estate tax. The only exception is that under current law the I.R.S. gives us an annual exclusion of $13,000.
All the above may sound a bit complicated, and this is where legal advice comes in. 2012 is a watershed year for estate tax planning. Beginning January 1, 2013 the exclusion reverts to $1 million. Now is the time to act. Putting it off will to the end of the year will place you at the end of the line and there will not be time to complete your plan. If you are interested in transferring some assets to your loved ones for estate tax planning purposes as part of your long-term financial plan the first step is to sit down and discuss tax efficiency strategies with a licensed and experienced Kansas City financial planning lawyer.
Author, President and Founding Attorney
Parman & Easterday
- Do I Really Need an Estate Plan? - March 31, 2020
- Founding Attorney, Larry Parman, Shares a Personal and Insightful Message about the Coronavirus Situation and How the Firm is Handling It (click on the video below) - March 27, 2020
- Understanding Estate Planning – Developing a Fair Inheritance Plan - March 26, 2020