Ideally, we plan well in advance of the end of our lives. Even if we have used prudence and planned, it is a good idea to revisit those plans as time draws near.
First, a general review of plans is in order. Often, plans have not been reviewed in many years. As these plans are nearing implementation, it is wise to make sure they are still representative of your wishes. Circumstances may have changed. In fact, the fact that time is short is a circumstance that might alter your planning. For example, you may have wanted to make a gift to your alma mater at your death. With your time short, you may want to make that gift during your lifetime. By doing so, you will live to see the gratitude of your school for your gift. There is also a tangible benefit: In addition to avoiding estate taxation the same as a post-death gift, a lifetime gift qualifies for an income tax charitable deduction. This slight change in timing could earn your descendants or other beneficiaries up to 1/3 or more of the value of the charitable gift in income tax savings.
Other income tax savings can be achieved by selling assets which have a built-in loss. Any losses which remain at death are lost and cannot be taken by the heirs. Similarly, normally you would want to refrain from selling any assets that have a built-in gain that would be taxed. The gain in assets is wiped out at your death, allowing your beneficiaries to receive the assets without that built-in taxable gain.
If you have a taxable estate, gifting assets may make sense. Each person can gift up to $11,000 to any person each year without using any of the lifetime exemption of $1.5 million. So, if you have 5 children, 10 grandchildren, and 5 friends you want to benefit, you could get 20 x $11,000 = $220,000 out of your estate tax-free each year.
If you want to make gifts before your death, cash is the best choice. If you gift an asset that has built-in gain, the recipient will have that taxable gain which otherwise would have been wiped out at your death. If you gift an asset with a loss, the recipient will not be able to use that loss on his or her taxes. If you do not have sufficient cash for your desired gifting, it may be possible to sell assets with offsetting losses and gains. This would be an income tax wash for you and would get assets to your beneficiary without the built-in gain.
As life draws to a close, it seems time is more precious than ever. A few minutes with a qualified estate planning attorney may help you get more money to your descendants or other beneficiaries. More importantly, such a visit may allow you to rest easier knowing that everything is in place to make sure your wishes are carried out.
Mr. Ronald “Chip” Morrison, Jr. is a Board-Certified Specialist in Estate Planning and Administration by Louisiana Board of Legal Specialization and a member of the American Academy of Estate Planning Attorneys. He has been engaged in Louisiana trusts and estate law for the last 16 years and can prepare an estate plan for you that achieves your goals of passing your assets to whom you wish. To learn more about how you can achieve your estate planning goals, please call our office at (504) 831-2348 or contact us through our website.