It’s Time for Year-End Planning
It's hard to believe 2014 is almost over. As 2015 approaches, many folks with estate plans should be thinking about a number of things that will enhance their estate plans. Many techniques have to be implemented before December 31, while others can be implemented after the first of the year, in order to take advantage of savings opportunities with regard to estate and gift taxes.
One example is that individuals have the opportunity to limit the size and growth of their taxable estates by making annual gifts to potential heirs. For example, as the law stands for 2014 and 2015, it is possible to give a gift of up to $14,000 per person per year, without that amount counting against the lifetime unified (gift and estate) tax exemption. Married couples can gift as much as $28,000 per person per year, based on that formula. By making a number of $14,000 gifts to multiple beneficiaries every single year, it is possible to transfer a significant amount of wealth over time, and reduce the potential burden of the estate tax when the time comes. This gift tax annual exclusion is based on a calendar year, so you can make $14,000 gifts on December 31 and January 1, and not have to think about it again for two years..
Those who are interested in creating a 529 plan account for children or grandchildren, or who would like to add to such a plan that already exists. have to make those contributions before the end of the year to reduce the tax burden for the current tax year. They should also consider front loading the accounts with up to five years worth of $14,000 annual exclusion gifts, which can be done legally right now. Doing so could also relieve the potential estate tax burden when you pass away.
Charitable gifts have the benefit of not just reducing your heirs' exposure to the estate tax; they also reduce the amount of income tax you owe. However, keep in mind that all donations made to charity must be received by the charity by December 31 of this year if you want to experience the income tax benefits for this year. That's an important distinction to keep in mind; the deduction is recognized on the date of receipt of the money and not on the date the check was written, or the date of the postmark if it was mailed.
Another thing to consider is that donating appreciated assets can often enhance the tax benefits of the gift, because the charity can sell the appreciated assets at any time without being hit with the capital gains tax.
The end of the year is also an appropriate time to review all of your estate planning documents, including wills, trusts and powers of attorney. When you review your estate plan, you should consider a number of things very specifically. For example, have all of your documents and updated to take advantage of tax law changes? Do your documents provide for asset protection for your loved ones, especially the children and grandchildren? To the provisions of these documents still accomplish what you set out to do with your estate plan?
This is also a good time to make sure that all fiduciaries named in your estate planning documents are still appropriate, and that all powers of attorney, living wills and other documents are still on file with specific family members and healthcare providers, especially if they've been updated in any way.
The end of the year is also a great time to make sure that all of your insurance policies and your retirement plan are still in line with the intentions of your overall estate plan. It's also a great time for business owners to make sure that their business is protected, by making sure that all documents, such as insurance policies, valuations and contracts are all up to date.
A end of the year is almost here, and this is a great time to make sure all of your ducks are in a row, and that everything is in good shape, so you can start out 2015 with peace of mind, knowing that your loved ones will be cared for when the time comes. .
