Like most parents, you want to leave as much as possible to your children so they can have a secure financial future. But did you know that all your hard work saving and investing could get eaten up by estate tax and income tax before ever reaching the next generation?

The Estate Tax Burden

The current estate tax law includes a dollar-value benchmark for whether your kids will have to pay an estate tax. As of 2023, if the total value of your estate is $12.92 million or more, your heirs will be charged an estate tax. That figure includes all of your assets, including property, art, jewelry, vehicles, cash, and retirement accounts.

The Solution: Year-End Gifting Strategies

One way to help reduce the estate tax burden is to reduce the value of your estate. A great way to do that is with year-end gifting strategies. This strategy takes advantage of the yearly gift tax exclusion.

As of 2023, You are allowed to give an individual up to $17,000 per year (that's $34,000 if you and a spouse each give that amount) without any gift tax being owed. These yearly gifts add up fast, reducing the overall value of your estate and transferring your wealth to the next generation without the burden of estate tax.

The Benefits of Gifting

There are 3 key benefits to gifting money to your heirs before you pass away:

  1. You're not only giving the maximum allowed amount per year — you're also giving the appreciation (interest) those gift dollars earn year after year.
  2. You're removing that money from potential creditors as well as the probate process, when the court supervises the breakup or administering of a deceased person's estate.
  3. Most important, you get to see your family enjoy the money. Why wait until after you're gone to see how happy it makes them? Use that money and time to take a family trip, fulfill lifelong dreams, or secure a grandchild's college fund.

Keep Your Gift Secure

Of course, there's another way to go about gifting that keeps that money secure from your creditors, as well as your children's creditors. It involves using a legacy trust, which I can can help you set up. With a trust, you'll make your yearly gifts to that trust instead of to your children. The trust then purchases a life insurance policy for you.

The life insurance policy gains cash value over time, which your loved ones can pull out and use for things like a house down payment or college tuition. When you pass away, the policy pays an income-tax-free death benefit to your family, which is also exempt from estate tax.

If you could put your children on the road to financial success with money you already have, wouldn't you do it?

To get started with a gifting strategy, call me or send me an email today!

Always consult your accounting, legal, and tax advisors before implementing any recommendations. This material does not constitute tax, legal, or accounting advice. It cannot be used for the purpose of avoiding any IRS penalty.