Category Archives: Estate & Gift Planning

Wealth Management Advisor, May/June 2016

160501 WMA Newsletter

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Articles Include:

International Estate Planning: How to avoid tax traps

Taxable vs. tax-advantaged: Where you hold your investments matters!

Protect your self from tax identity theft

Should you “undo” a Roth IRA conversion?

Year End Giving

It’s that time of year again!  The holiday season seems to have approached more quickly than ever this year!  Since this is the season of giving, we’d like to take this opportunity to quickly review the gift tax rules as they pertain to family wealth transfers without the imposition of a gift or transfer tax.


In 2013, each person has the ability to transfer a maximum of $14,000 per year to anyone they choose on a transfer tax free basis.  This means that a married couple can give a maximum of $28,000 to each family member.  Best of all, these transfers are not subject to the Gift Tax Transfer System, which currently imposes a tax of up to 35% of the fair market value of the assets transferred.

Something to think about when considering an annual gifting program is that the gifts are made with no strings attached.  Accordingly, your heirs can use the gift for any purpose they choose.  Of course, since gifting is an annual decision, you can decide to discontinue future gifts at any time if you feel they are causing more harm than good.  If inappropriate gift consumption is a concern, contact us and we’d be happy to get together to discuss alternative gifting strategies that do have strings attached.

A final note on annual gifting… is most advantageous to gift cash.  A gift of appreciated securities, for example, brings with it an eventual income tax liability since the recipient assumes the cost basis for any assets received.  In other words, it’s akin to gifting 80 to 85 cents on the dollar (depending on your tax bracket), rather than 100.


One of the most advantageous (and least publicized) tax free gifting strategies pertains to educational and medical costs incurred by others.  Transfers made for these purposes are gift tax free and do not count toward the $14,000 annual gift tax exclusion mentioned above.  But just like most other IRS matters, there is a catch.  The transfers made for educational and medical purposes must be paid directly to the provider.  In other words, funds cannot be transferred to your children and they, in turn, pay their educational or medical provider.  Even considering the small administrative hassle, the benefits of paying for these type on expenses is significant.  Any funds that are used for this purpose completely avoid the Transfer Tax System, saving up to 35% in gift/estate tax.

If either of these strategies has piqued your interest, please do not hesitate to call so we can customize a gifting strategy to meet your specific goals.