Wealth Transfer

Taxation almost always accompanies the transfer of wealth. However, which of your assets are taxed, when they are taxed, and the rate at which they are taxed are to some degree within your control.

Take, for example, planned giving. During your lifetime, you, in your capacity as “donor,” are entitled to give away cash, stocks, bonds, real estate, and business interest without incurring a “gift tax,” as long as your gifts do not exceed the per-recipient annual limit of $14,000 (in 2014).

The per-donor lifetime gift/inheritance tax exemption for 2014 is $5,340,000. Such gifts, however, are considered part of your estate, and will therefore eventually influence your estate tax in the following way: Each decedent has a unified credit exemption from the estate tax, unless that exemption is used to exempt gifts made during your lifetime. All assets whose value exceeds that federal unified credit exemption are taxed at fairly high rates upon your death.

There are numerous ways to discount the annual and lifetime gift tax exclusion so that your loved ones receive an amount greater than the assessed value of the gifts. These include the formation of irrevocable life insurance trusts (ILITs), limited liability companies (LLCs), and family limited partnerships (FLPs). There are also many ways to influence the estate tax. At McDowall Cotter, we create comprehensive wealth preservation and transfer plans that help you mitigate taxation and maximize family wealth.

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