Gifting

In addition to the use of trusts, gifting strategies may be used as a means of distributing your estate and effectively reducing estate taxes upon death. In many cases, gifting has the dual advantage of not only removing the asset itself from your taxable estate, but also removing the appreciation on that asset as well. In general, the transfer of property during the time that you are living can be subject to gift taxes depending on the type of gift and its value.

Under the Annual Gift Tax Exclusion, an individual can give away up to $13,000 to each of any number of recipients without incurring a gift tax or any gift tax impact. You can make this type of gift to as many people as you want each year as long as you do not exceed $13,000 per recipient. Gifts in excess of this amount will first reduce your applicable exclusion (and ultimately your applicable credit) before being subject to tax. An effective gifting strategy can allow you to significantly reduce overall estate taxes that may be due on death. For example, a married couple can gift $13,000 each per child per year for a total of $26,000 per child. If the couple had two children, they could reduce their taxable estate by up to $52,000 per year.

Gifts to minors may involve practical problems when it comes to larger gifts. For example, many states do not allow minors to register stocks in their names. In order to avoid these types of problems, most large gifts to minors are made in trust or under some type of custodial arrangement such as an UGMA/UTMA account.

Gifts can be made outright, either directly to the individual or to a trust for the benefit of the individual. A trust has some distinct advantages; however specific rules must be followed if you want the gift to qualify for the annual exclusion.

Other gifting strategies which can be used involving gifting to charities, including religious organizations, community organizations, museums, universities, hospitals, etc. These may be cash or asset gifts or gifts that result from a variety of trusts. Whether a current gift or a future trust gift, you may receive an income tax deduction for your charitable gifts. Additionally, these charitable gifts may be lifetime gifts or testamentary gifts (established through your will).

Advantages:

• Gift up to $13000 per individual annually (indexed) to an unlimited number of recipients
• Potentially reduce income and estate taxes
• Can make substantial gifts over time without using any of your applicable credit
• Gifts to certain charitable trusts may result in charitable deductions
• Inexpensive to administer

Disadvantages:

• Special considerations for gifts to minors
• Gift is irrevocable and control of asset is transferred
• Professional assistance may be needed for drafting trusts or other legal documents, where applicable

B.C. Ziegler does not provide tax advice. Please consult your tax advisor.

Our planning services are not financial planning (unless they are specifically called investment consulting services). They do not create an investment advisory or a fiduciary relationship (including under ERISA) between you and B.C. Ziegler and Company. B.C. Ziegler and Company will prepare a financial plan at your specific request through NaviPlan.

Investment consulting services are offered at B.C. Ziegler and Company only through investment advisory programs and are not available through traditional brokerage accounts and products. Please speak with a Ziegler Wealth Management financial advisor to further discuss the differences between brokerage and advisory products offered by B.C. Ziegler and Company.