One of the most common and popular ways to decrease your estate and avoid estate taxes when you die, is gifting. Each year you can gift up to $14,000 to your child, grandchild or other persons without paying gift taxes. This gift is not taxable to the recipient but it is also not tax deductible to the giver. Each spouse can give $14,000 which doubles the exclusion.
Paying a donee’s tuition or medical costs directly is another way to lower your estate. If you pay your child or grandchild’s higher education tuition directly to the college or university, it doesn’t count against the $14,000 gift exclusion. So, you can gift $14,000 and pay the tuition without paying gift taxes. You can donate to a 529 college savings plan and contribute $70,000 ($140,000 for married couples) without paying gift tax, but it may limit what you can give for the next 4 years.
Paying medical expenses directly to the doctor or medical facility on behave of a child or grandchild can also be gifted on top of the $14,000 without gift tax consequences. Gifting is a great way to reduce future estate taxes as well as avoiding the tax on future appreciation of the gift. As always consult your tax advisor and/or estate planner to see how gifting will benefit your personal situation.
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