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How can giving gifts help with tax benefits for heirs?

For many people, helping others is an important value in their lives. Many people in the Kent area give generously and hope that their legacy will include the generous contributions they have made to society. Giving gifts can also have tax advantages for givers and their heirs.

As part of estate planning many people consider giving gifts to loved ones and their favorite charities. Besides being a nice gesture for charities and loved ones, giving also allows for certain tax benefits by reducing your taxable estate. There are two ways for a person to give gifts without incurring the gift tax. The gift tax is applied for any amount that is given over $14,000. A person may give an unlimited amount for medical or educational expenses. This money must be given directly to the institution. Second, a person may give up to $14,000 annually to as many people as they want.

If a gift is more than $14,000 the giver will have to file a gift tax return and the excess will apply to the person'slifetime gift and estate tax exclusion that is currently at $5.25 million. Any amount given that is over the gift tax exclusion will be taxed. Gifts also count toward the federal tax-free amount that you may leave to your heirs. People with large estates should consult with an estate attorney to make sure they are giving wisely and not inadvertently causing a large tax bill.

Next week we will discuss charitable giving and using a charitable trust. A charitable trust can have significant tax advantages all while helping your favorite charities.

Source: money.cnn.com, "Estate Planning: Bestways to give money now", accessed on Nov. 3, 2014

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To speak with an attorney at Gellner Law Group about estate planning, probate, trusts, wills or tax controversy, contact our law office in Kent, Washington, today. You can call 425-336-2908 or send us an email. We provide representation across the entire Seattle-Tacoma metropolitan area.

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