BOSTON (CBS) – Happy Thanksgiving!
When you mention gifting what usually comes to mind is a birthday or Christmas. What I’d like to talk about today is gifting assets to another generation.READ MORE: 'In Like A Lion': March Weather Brings Drastic Swing In Temperatures This Week
Your federal estate tax exemption, which is the amount you can give away tax free when you die, for this year is $5.34 million and next year will be $5.43 million and if you have more assets than that your estate will owe federal estate taxes. Married couples have an unlimited gifting privilege between spouses in life or death.
And for Massachusetts, your estate exemption is just $1 million. And it gets complicated. So if you have amassed the big bucks find a good estate-planning attorney to help you.
As for your annual gifting exclusion each of us can give away $14,000 this year and next to as many recipients as we wish as long as we have the money to make the gifts. And if we are married and our spouse joins in we can gift $28,000. We can also pay someone’s medical or school bills without incurring a gift tax.
So why would we want to give away our money? If you want to help the next generation accomplish their goals or if you want to pare down your estate so you won’t owe estate taxes. You can do this using your gifting exclusion.READ MORE: South Attleboro MBTA Station Closes Due To 'Deteriorating' Pedestrian Bridge
For example, you have an estate worth $1.2 million it will owe no federal estate taxes but will owe Massachusetts estate taxes. Now would you rather give it away to your family or to the government?
Perhaps you have children or better still grandchildren you might like to help out financially. Consider gifting them the excess over the $1 million.
Gifting can be an estate planning tool for you can save on future estate taxes and have the pleasure of watching your dollars work for your children or grandchildren while you are still alive. But do not give away assets you think you will need in the future.
If any of your grandchildren are in college or grad school you can pay their tuition and medical insurance, but you need to pay it directly to the school. And after paying the bills if you still have some money left over you can cut them a check for $14,000 and if your spouse joins in it could $28,000.MORE NEWS: Johnson & Johnson Vaccine 'Particularly Good For Mass Vaccination Campaigns,' Boston Doctor Says
One more thing: Thanks to Peter Johnson of Woodman & Eaton of Concord, MA for helping me understand the MASS estate tax.