Posted on September 20, 2006 at 18:41:45:
One of the best ways to reduce taxes on a large estate is to give away the money before you die. Many people remark on how emotionally satisfying is to watch their families enjoy the financial help now – and it can save on taxes, too.
As of this year, an individual can give away $12,000 annually ($24,000 for a couple giving jointly) to as many individuals as they choose without cutting into the $1-million lifetime gift tax exemption. A couple with four married children and seven grandchildren, gifting each child, spouse and grandkid, could move $360,000 out of their estates. In addition, there’s no limit to how much they can spend for education or healthcare, as long as checks are written directly to the school or doctor.
No gift tax return is required. But is money is given to a trust to pay life insurance premiums (with the requisite paperwork), it’s smart to file to prevent the IRS from assessing taxes later.