Your legacy can leave a lasting impact on the loved ones you leave behind after your passing. Of course this generally includes the direct transfer of monetary assets, but you can take things a step farther if you would like to. They say that it is better to teach a person how to fish than to give them a fish. With this in mind we would like to take a look at the advantages of educational gift giving.
If the value of your estate exceeds the estate tax exclusion the heirs to the estate could be facing a very significant tax bill. As of this writing the estate tax exclusion is $5 million and the rate of the tax is 35%. This 35% rate is considerable to be sure, but when 2013 arrives the exclusion is going down to $1 million and the rate is rising to an eye-popping 55%.
Given these realities you need to take action if you are exposed to the estate tax. You could gain the dual advantage of reducing the value of your estate for estate tax purposes while leaving behind a legacy of education by offering educational gifts to your loved ones.
Each taxpayer may pick up tuition costs as a gift for any number of people totaling any sum of money, all free of the gift tax. Paying the tuition of family members who are of college-age can provide them with a clear path toward a successful future. And while you are doing so you will be reducing your exposure to the federal estate tax.
Taking advantage of this exemption can provide a win-win all the way around. To learn more about educational gift giving and how it could fit into your legacy plan simply take a moment to arrange for a consultation with an experienced estate planning lawyer.
Author, President and Founding Attorney
Parman & Easterday