One of the easiest ways people can minimize their estate tax burden is to create a gift strategy. Though easy to do, creating a gift strategy is one of the more underutilized estate planning tools available to many families. Your attorney will be able to help you create a gift plan that fits your individual circumstances, but here are some tips to keep in mind.
Tip 1: Use pre-existing deadlines.
The simplest gift strategy piggybacks on the dates that are already important to you to remind you of when you need to give gifts. Christmas, New Years, and birthdays are the most commonly used dates, allowing you to know easily when you need to make a gift.
Tip 2: Maximize, but don’t over gift.
The trick to minimizing estate taxes through gifting is to give away as much as possible but not more than you should. Federal estate tax rules limit how much you can give away to each person each year, as well as place an overall limit of the amount of lifetime gifts you can give. When you develop your plan you will need to have these limits firmly in mind, and will need to keep excellent records so you can know how much you’ve given away at any given moment.
Tip 3: Be ready to hand over gift-giving authority.
If you should suddenly become incapacitated you will need someone who can continue your gift-giving plan when you are no longer able. Creating a proper financial power of attorney that specifically grants your agent the ability to do this is something you’ll definitely want to speak to your attorney about.