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 giving it away. The IT being an asset you want to give to another generation.READ MORE: 103-Year-Old Man Celebrates Birthday While Getting COVID Vaccine At Lowell General Hospital
Your federal estate tax exemption, which is the amount you can give away tax free when you die, for this year is $5.45 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. The Massachusetts estate tax is a graduated tax with rates ranging from 0.8% to 16%.
As for your annual gifting exclusion each of us can give away $14,000 each year 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? Basically so we don’t have to pay an estate tax on it when we die. You can pare down your estate so there will be no estate taxes due. You can do this by using your gifting exclusion.READ MORE: Coronavirus In Massachusetts: Today's Developments
For example, if 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 now or to the government later?
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.
You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.MORE NEWS: Natick, Newton North Scrimmage Ahead Of Spring Football Season
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