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Publication #FAR9052

 

Gifts Can Reduce Estate Taxes 1

Josephine Turner2

Everyone has heard a nightmare story about the loss of a family member whose estate didn't end up with his or her desired beneficiary. A properly prepared will that is updated periodically is the only way to guarantee that your property at your death will be distributed according to your wishes. However, a will by itself will not reduce estate taxes.

Several alternatives are available to help reduce estate taxes, such as giving property while you are alive. Most important, however, is that you don't give any property away that may be needed for your own livelihood.

If you're concerned about protecting your spouse, the unlimited marital deduction allows you to transfer all of your assets to your spouse without estate taxes. The total estate is taxed when the last spouse dies and you have not taken advantage of the spousal deduction.

As the estate is passed on to the heirs, if the value of the total estate is in excess of the allowable exemption, there are other strategies that can be used to decrease estate taxes. One of the most popular is the "bypass trust" or "credit-shelter trust." This trust is designed to allow the first to die to take full advantage of his/her exemption, allowing $2 million (2006) to pass free of federal estate taxes. Being aware of the tax laws and available planning tools can save thousands of dollars in estate taxes and allow greater benefit to the loved ones left behind.

Listening, learning, and living together: it's the science of life. "Family Album" is a co-production of University of Florida IFAS Extension, the Department of Family, Youth and Community Sciences, and of WUFT-FM. If you'd like to learn more, please visit our website at http://www.familyalbumradio.org.

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References

Garman, E. T. (2006). Personal finance (8th ed.). Houghton Mifflin.

Internal Revenue Service. (n.d.) Estate and gift taxes. Retrieved September 26, 2007, from http://www.irs.gov/businesses/small/article/0,,id=98968,00.html.

Kapoor, J. R.,Dlabay, L. R., & Hughes, R. J. (2001). Personal finance (6th ed.). McGraw-Hill.

Footnotes

1.

This document is FAR9052, one of a series of the Family Youth and Community Sciences Department, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida. Broadcast as program 364. Published February 2009. Revised March 2009. Reviewed March 2012. In the interest of time and/or clarity, the broadcast version of this script may have been modified. Visit the EDIS website at http://edis.ifas.ufl.edu.

2.

Josephine Turner, professor, Department of Family, Youth and Community Sciences, Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, FL 32611.

The Institute of Food and Agricultural Sciences (IFAS) is an Equal Opportunity Institution authorized to provide research, educational information and other services only to individuals and institutions that function with non-discrimination with respect to race, creed, color, religion, age, disability, sex, sexual orientation, marital status, national origin, political opinions or affiliations. For more information on obtaining other extension publications, contact your county Cooperative Extension service.

U.S. Department of Agriculture, Cooperative Extension Service, University of Florida, IFAS, Florida A. & M. University Cooperative Extension Program, and Boards of County Commissioners Cooperating. Nick T. Place, Dean.