California Probate - Law Offices of Janet Brewer Blog

6 Common Living Trust Mistakes to Avoid

Save your family the headaches and avoid simple living trust mistakes with these tips.

Creating a living trust is one of the best financial moves an individual can make. Having a living trust in place can secure your assets, ensure they go to the loved ones you have identified, and help to avoid potentially ugly legal battles in the event of death or incapacity. However, some living trusts include common mistakes that can invalidate or undermine some of the intentions if they aren’t properly addressed. Examples of common mistakes that are encountered include the following examples.

1. Not updating it regularly.

Living trusts often reflect the author’s intentions at a single point in time. However, family situations, legal ties, and financial holdings often change continuously. These changes are further exacerbated in the event that a move out of state or out of the country occurs. Updates to a living trust should be made whenever there is a substantial change in any circumstance that could impact the transfer of benefits, such as a birth, death, marriage or divorce in the family, as well as any relocation, or when tax laws change dramatically. Even in the absence of a substantial change, a living trust should be reviewed and updated at least annually.

2. Failing to Properly Title Assets.

Living trusts control the assets that are put under it; however, it is common for individuals to create a well-thought-out trust, yet not change the titling necessary to add the asset to the trust. Without proper titling and beneficiary designations to the trust itself, the trust cannot protect the asset itself. This mistake is one sure way to ensure that any assets owned outside of the trust will end up in probate court.

3. Selecting the Wrong Trustee.

The role of a trustee is to objectively analyze the circumstances, act in accordance with the trustor’s wishes, and equitably distribute assets. While many people automatically choose one or more of their children to fulfill this role, these individuals have a vested self-interest that may conflict with them fulfilling their duty as a trustee. Be sure that anyone you select has the capacity to truly perform their duty diligently; if you cannot identify someone in your personal life, it may be worth considering an external, professional trustee.

4. Minimizing the Impact of Creditors.

Living trusts do not automatically protect the assets from creditors, particularly if it is a revocable living trust. Because of this limited protection from creditors, it’s crucial to understand how any outstanding debt may impact the assets you have, and what will be available for beneficiaries. And while you can’t protect the assets from your own creditors, with a carefully drafted one, you may be able to protect your trust assets from your spouse’s or children’s creditors.

5. Forgetting About Estate Taxation.

All assets in a living trust are considered part of your gross estate for estate planning tax purposes – even real estate. You will want to calculate all of the assets and determine what the tax liability will be when the assets are transferred; this process will help your estate and beneficiaries avoid the surprise of a large, unexpected tax burden. Carefully crafted estate plans can take these concerns into consideration with local tax laws and help you to identify ways to reduce this tax burden and ensure that more of your assets stay in the hands of loved ones.

6. Why you should use an Estate Planning Professional to Prepare your Living Trust.

It’s incredibly easy to find form trust documents or software packages that can help you create your own living trust. While this might seem like an easy process, they certainly can’t provide the same level of protection that a professional estate planning service can. And the more complex your estate is, the more you can benefit from working with an experienced professional.

If you miss any step in creating your own trust, it can potentially invalidate the entire trust, or result in any number of unintended consequences. Many of the standard trust forms also act much more like a will in that they serve to distribute assets outright to beneficiaries. Many individuals with estate plans understand that lifetime trust for beneficiaries can provide better long-term protection for the assets.

Speaking with a trusted and experienced professional is the best way to understand all of your options and ensure that you have a living trust that serves its purpose.

How Do I Use the Pandemic to Finish My Estate Plan?

The coronavirus is making this a most challenging time. It can make considering our own death all the more frightening. However, for some, this is the perfect time to think about estate planning. Your estate plan should be a priority in this crisis.

While looking for issues is important, there are also opportunities to consider, according to Yahoo Finance’s recent article entitled “How to Take Advantage of New Estate Planning Opportunities Caused by the Coronavirus.”

For some, the current financial landscape may be advantageous, due to low interest rates and depressed asset values. That is where your estate planning strategy is needed.

The IRS just announced one of the lowest rates applicable to certain wealth transfer techniques. This, in addition to depressed asset prices, can make for some great opportunities.

This is a very good time for estate planning, because of the federal estate tax system. Even though the federal estate tax rate is a flat 40%, we can currently gift during life or leave at death a total of $11.58 million to children or loved ones without any taxes.

As a result, a married couple can leave more than $23 million to loved ones, before they start to pay federal estate tax.

The federal estate tax exemption is very liberal, when compared to the past. It is also scheduled to adjust upward for inflation until the end of 2025. The federal estate tax exemption will then be cut in half, unless extended or made permanent.

Yes, Congress can also act before that. They can enact a law, and a president could sign it to decrease the exemptions even sooner. Therefore, regardless of the current opportunity, it may be the right time to make gifts before the exemptions decrease.

The key is to have a strategic plan and to make decisions that are right for you and your family.

Estate planning can be intimidating and doubly so in this pandemic. Talk to an experienced estate planning attorney and take care of this today to protect your families and their futures.

You can read more about how our process works, how we can make sure we are a good fit for your needs, and how to get started today right here.

Reference: Yahoo Finance (April 2, 2020) “How to Take Advantage of New Estate Planning Opportunities Caused by the Coronavirus”

What are Three Areas of Giving Not to Skip?

“How do you plan to pass the gift of your good financial fortune on? Defining your goals and creating a giving strategy is key to beginning the process.”

It may be important to you that your family and the charities in which you believe, benefit from your success. Giving lets you practice your core values. However, for your giving to be meaningful, you need a plan to maximize your generosity.

Kiplinger’s recent article entitled “Gifting: 3 Areas You Shouldn't Overlook” advises that there are many things to think about before gifting, and although there are benefits to estate planning, there are other issues to consider.

Think about your gifting goals. Any amount given to a family member, friend, or organization will no doubt be treasured, but ask yourself if the recipient really wants or values the gift, or it only satisfies your personal goals.

As far as giving to a charity, you should be certain that your donation is going to the right organization and will be used for your intended purpose. Your giving goals, objectives and motivations should match the recipient’s best interests.

If gifting straight to a family member is not a goal for you now, but you want to engage your family in your giving strategy and decision making, there are several gifting vehicles you can employ, like annual gifts, estate plans and trusts. Whichever one you elect to use, it will let you place an official process in the works for your strategy. Family engagement and a formalized structure can help your gift make the greatest impact.

There is more to gifting than just determining who and how much. It’s critical to be educated on the numbers, in order to maximize your gift value and decrease your tax exposure.

You can now gift up to $11.58 million to others ($23.16 million for a married couple) while alive, without any federal gift taxes. The amount of gift tax exemption used during your life also decreases your federal estate tax exemption. You should also be aware that this amount will fall back to $5 million (and $10 million for a married couple) indexed for inflation after 2025, unless renewed.

If you transfer your wealth to heirs and beneficiaries early and letting it compound over time, you can avoid significant estate taxes. In addition, note the annual gift exemption because with it, you can gift up to $15,000 ($30,000 as a married couple) to anyone or any kind of trust every year without taxes.

An experienced estate planning attorney can help you create a giving strategy to achieve success for you and those you are benefiting.

Reference: Kiplinger (March 19, 2020) “Gifting: 3 Areas You Shouldn't Overlook”

When Should I Update My Estate Plan?

“Has it been a while since you reviewed your estate planning strategy? If so, it may require some updating, based on recent changes to laws impacting your tax and retirement planning.”

Forbes’ recent article entitled “Do You Need A Trust? 8 Important Goals A Trust Can Help You Achieve” discusses eight ways a trust can help you achieve specific legacy planning goals. The first step is to meet with an experienced estate planning attorney.

Everybody needs a will, but not everyone requires a trust. A trust provides greater flexibility and control over how your property and assets are distributed. Many people create a trust to avoid probate. As a result, it’s faster and easier for your named trustee(s) to distribute your assets to your heirs. There are a many different types of trusts with advantages and disadvantages. Talk about what will be best for you with your estate planning attorney.

1. No probate. This process can take months or more to complete, and it can be very expensive. A trust is designed to settle your estate in a timely and relatively inexpensive manner.

2. Privacy and confidentiality. Probate is public, so your will and other private financial and business info is available to everyone. However, a trust maintains privacy and confidentiality.

3. Protection for beneficiaries. A trust can shield beneficiaries from lawsuits, creditors, or divorce.  A trust can also protect the interests of a minor, by including direction for when distributions are made.

4. Provide for children with special needs. This type of trust provides for the health care and personal needs of a minor child or adult who has special needs and won’t impact their eligibility for Medicaid benefits.

5. Flexibility. As the creator of the trust, you determine the terms of the trust, and can put restrictions on how trust assets are managed. For instance, the trust could state that assets may only be used by the beneficiary to purchase a home or to pay medical bills but may not be distributed directly to the beneficiary.

6. Preserve family wealth. Divorce and remarriage can result in assets that were supposed to stay in the family wind up leaving with the ex-spouse. A trust can make certain that your estate is preserved for grandchildren.

7. Family values. A trust can be a wonderful way to pass down family values concerning education, homeownership, land conservation, community service, religious beliefs, and other topics.

8. Lessening family conflict. Challenging a trust is difficult and costly. Having a trust in place that clearly articulates your wishes for your family, reduces the potential for misunderstanding.

Whether you have a trust in place or are thinking about creating one, it’s important to meet regularly with your estate planning attorney to be certain your strategy and estate planning documents reflect any new state and federal tax laws, as well as any changes in your goals and circumstances.

Reference: Forbes (Feb. 24, 2020) “Do You Need A Trust? 8 Important Goals A Trust Can Help You Achieve”

Do I Need to Be Wealthy to Set Up a Trust?

“If you've heard of trust funds but don't know what they are or how they work, you're not alone. Many people know just one key fact about trust funds: they're set up by the ultra-wealthy as a way to protect passing on significant sums of money to family, friends, or entities (charities, for example) after they pass away.”

Trust funds are intended to let a person's money continue to be useful after they pass away. However, they aren't only useful for ultra-high-net-worth individuals. Many people can benefit from the use of a trust.

Investopedia’s recent article entitled “How to Set Up a Trust Fund if You're Not Rich” says that you can place cash, stock, real estate, or other valuable assets in your trust. Work with a trust attorney and decide on the beneficiaries and set any instructions or restrictions. With an irrevocable trust, you don't have the ability to dissolve the trust, if you change your mind later on. Once you place property in the trust, it’s no longer yours but is under the care of a trustee. Because the assets are no longer yours, you don't have to pay income tax on any money made from the assets, and with an estate planning attorney’s guidance, the assets can be exempt from estate and gift taxes.

Tax exemptions are a main reason that people set up an irrevocable trust. If you, the trustor (the person establishing the trust) is in a higher income tax bracket, creating an irrevocable trust lets you remove these assets from your net worth and move into a lower tax bracket.

If you don't want to set up a trust, there are other options. However, they don’t give you as much control over your property. As an alternative or in addition to a trust, you can have an attorney draft your will. With a will, your property is subject to more taxes, and its terms can easily be contested in probate. You also won't have much control over how your assets are used.

Similar to a 529 college-savings plan, UGMA/UTMA custodial accounts are designed to let a person use the funds for education-related expenses. You can use an account like this to gift a certain amount up to the maximum gift tax or fund maximum to reduce your tax liability, while setting aside funds that can only be used for education-related expenses. The downside to UGMA/UTMA Custodial Accounts and 529 plans is that money in the minor's custodial account is considered an asset. This may make them ineligible to receive need-based financial aid.

For those who don't have a high net-worth but want to leave money to children or grandchildren and control how that money is used, a trust may be a good option. Talk it over with a qualified estate planning attorney.

If you have any questions about your current estate plan, please call or email us today.

Reference: Investopedia (Dec. 12, 2019) “How to Set Up a Trust Fund if You're Not Rich”

What Does Recent Legislation Mean for the Generation-Skipping Transfer Tax (GSTT) Exemption?

“Recent legislation provides unprecedented opportunities to minimize or avoid estate, gift and generation-skipping transfer taxes (GSTT).”

Congress has made some significant changes through the planned sunset of the Tax Cuts and Jobs Act (TCJA) increased exemptions and through the recent changes to retirement planning in the Secure Act.

Think Advisor’s recent article entitled, “Estate Planning Tips and Updates,” looks at some of the most notable of these.

1. Increased Estate Tax Exemption Amounts. The current applicable exemption amount of $11.58 million each (or $23.16 million for a married couple) lets many people totally avoid transfer taxes. However, the applicable exclusion amount reverts to its prior inflation adjusted amount in 2026. Therefore, if you have a gross estate of $11 million and previously made, say, $7 million of gifts, the rules eliminate any claw back of those gifts, if death occurs in 2026. However, you have no applicable exclusion amount remaining, says the IRS. As a result, after the sunset, you have a gross estate of $4 million and no remaining exemption. With this example, you’d be wise to consider implementing one or more strategies, including gifts and sales to grantor trusts, before the end of 2025 to be certain you fully use the disappearing exemption.

2. The Increased Generation-Skipping Transfer Tax (GSTT) Exemption. The TCJA also upped the GSTT exemption to $11.58 million each. This allows many people to exempt transfers for several generations, if not in perpetuity, under the laws of certain states. However, they must intentionally draft trusts to establish legal situs in states like Nevada to leverage longer perpetuities periods. This will result in avoiding additional estate, gift and GSTT taxes for longer periods, normally a net positive.

3. Annual Exclusion Gifts. Regardless of the increased exemption amounts, continued annual exclusion gifts (currently $15,000) are still going to be a crucial component of most estate tax reduction planning, removing the amount of the gift and its future appreciation. The tax-exclusive nature of the gift tax makes gifts more tax-efficient.

4. Basis Harvesting. The increased exemption amounts often will result in some people with previous trust planning no longer having estate tax issues. These people could look at reforming, amending, or decanting an existing trust to add older generations in a manner to cause inclusion in their estates. This inclusion triggers the basis step-up rules in the code and may dramatically reduce taxes upon a liquidity event, like the sale of a business interest previously gifted or sold over to the trust.

5. Secure Act Age Changes. For those born after July 1, 1949, the Act raises the beginning age for minimum distributions (RMDs) to 72.

6. Employer Inducements. The Act increases the current $500 credit for setting up a retirement plan to $5,000 in some situations and provides a $500 credit for three years to encourage the use of auto-enrollment.

7. Inherited IRAs. The Act substantially restricts the use of “stretch” IRAs. For deaths after December 31, 2019, a recipient of an IRA from the deceased must generally take distributions from the IRA over no more than a 10-year period. However, the new rules exempt accounts inherited by a spouse, a minor child, a disabled or chronically ill person, or anyone less than 10 years younger than the deceased account owner.

8. Annuities. The “stretch” IRA provisions also apply to annuities with one important exception. Annuities making payments before January 1, 2020, may still pay out over two lives. The new law encourages greater investment in annuities through 401(k) plans, and especially plans offered by smaller businesses, by decreasing the risk associated with offering annuities. As a result, employers offering annuities as investments won’t have fiduciary duties as to those potential annuity investments, assuming they choose an issuer in good standing with the applicable state insurance commission. The Secure Act also offers portability for annuities, if you change jobs. This is a direct transfer between retirement plans.

Reference: Think Advisor (March 25, 2020) “Estate Planning Tips and Updates”

Exemptions, Exclusions, and Deductions – What You Need to Know

When it comes to tax exemptions, exclusions, and deductions, there is a lot to learn for estate planning purposes. If you are just starting out with your estate plan, you should understand a few basic tax concepts.

What Is an Exemption?

For estate planning, the term exemption usually refers to the estate and gift tax exemption. This is a dollar limit above which you must pay estate and gift taxes. If the total of your lifetime gifts and the value of your taxable estate are lower than the exemption amount, then your estate is exempt from estate taxes.

Right now, the estate tax exemption is $11.40 million for individuals and twice that for married couples. But this high exemption amount may get lower in 2025 if Congress does not pass a law extending the higher amount. Before 2018, the exemption was $5.49 million for individuals. With the lower exemption, it was more likely that the estates of people who owned valuable real estate or had a lot of cash on hand might end up owing estate taxes.

What Is an Exclusion?

For estate planning, the term exclusion usually refers to the gift tax exclusion. Every year, you can make gifts to one person of up to the exclusion amount before you owe taxes. In 2019, the exclusion amount is $15,000. So as an example, you could give your niece $10,000 and your grandchild $10,000 this year, and you would not owe taxes on those gifts. But if you gave either person more than $15,000, you would need to report it to the IRS and pay taxes. The exclusion amount applies to gifts of any type, not just cash, given without receiving anything of value in return.

What Is a Tax Deduction?

For estate planning, the term deduction usually refers to making deductions for charitable contributions. Gifts that you make to a 501(c)(3) charitable organization – whether during your lifetime or in your will – do not generate liability for gift and estate taxes. In fact, you receive a deduction from potential tax liability.

Further, deduction could refer to the deduction you can take for some estate planning and administration costs. While you cannot deduct the entire cost of estate planning, you may be able to take a deduction for tax-related expenses or for the costs of administering the estate of someone who passes away. Talk to your estate planning attorney and tax professional for help understanding if you can take these deductions.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Tax-Deductible Donations and Your Estate Plan

People with the means to make tax-deductible donations can benefit from making estate plans too. You may not realize the extent to which charitable impulses also may help you save money on taxes and assist family members.

What Do Tax-Deductible Donations Have to Do with Estate Planning?

For people who own valuable assets, estate planning may center on reducing liability for gift taxes now and estate taxes in the future. Otherwise, your estate could end up paying thousands or millions in taxes, leaving less money for your relatives and other heirs. Making charitable donations is a great way to both reduce the value of your taxable estate and benefit worthy causes at the same time.

Donations or gifts to 501(c)(3) organizations and some other groups will give you tax deductions in the years you make the donations. “501(c)(3)” refers to the provision of the United States tax laws that specifies which groups qualify and allows the deductions. By making donations, you take money from your estate and give it to someone else – without having to pay gift taxes at the time. It also makes your overall estate worth less money, which could eliminate estate tax liability in the future.

By carefully planning your gifts to charity, you can maximize the benefits for your personal estate. For example, you might be able to make gifts in years when you have high tax liability so that the deductions lower the total tax bill. Or you may strategically pay down your estate so that you have less than the exemption amount for estate taxes. Finally, you could create estate planning structures that benefit both your family and deserving organizations.

Using Charitable Trusts in Estate Planning

Many people choose to create charitable trusts in order to benefit organizations for years to come. For example, you might make a trust that pays income to family members for their lifetimes, then gives the remainder to a charitable organization after they pass away. Alternatively, you could choose a trust that makes monthly donations to a charitable organization for a set time period, then gives the remaining money to a family member. There are other possible types of estate planning structures that benefit charity too.

Further, you can make a direct bequest to a charity in your will. Any amount given to charity in a will is not subject to estate taxes. If you give your entire estate to charity, then your estate may not owe estate taxes at all (regardless of whether you exceed the estate tax exemption amount). Before you make such a gift, though, talk to a lawyer to get informed advice on the gift.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

2020 Offers a Temporary Increase in Exemptions from Estate and Gift Taxes: Why You Should be Taking Advantage of This Limited Time Exclusion

The Tax Cuts and Jobs Act was signed into law on December 22, 2017, and it continues to provide extraordinary opportunities for those who are planning for their estate. One of the most significant benefits gained through this Act was the temporary increases in exemptions on gift and estate taxes.

Changes in the Act

Currently, transfers of property that occur during one’s life or upon death in excess of the gift and estate tax exemption limit – which was $5,490,000 - are taxed at the federal rate of 40%. However, the Act doubled this exemption amount for a limited amount of time. Between January 1, 2018, and January 1, 2026, the federal estate, gift, and generation skipping transfer exemption amount is set at $11,180,000. This exemption limit is doubled for married couples.

This change means that individuals can leave a lot more of their wealth and assets to family members without incurring a tax rate of 40%. But it is crucial to understand that these exemption limits are only temporary; without another statutory change, the limits will revert to $5,490,000 after the January 1, 2026 deadline has passed.

Despite this, the IRS announced that individuals who use the exemption between 2018 and December 31, 2025, will not be adversely affected when the exemption reverts to its former level. They have determined that there would be no ‘clawback’ of gifts made by individuals during the defined period, even if the lifetime exemption amount is subsequently decreased.

There were no changes to the provisions that allow gifts of any amount for health care or education to be excluded from the gift tax. These payments must be made directly to the educational institution or medical provider, though.

Benefits of Estate Planning Now

Due to the changes made in the Act, estate planning activities, and asset transfers that occur during this time can be incredibly advantageous for families who are trying to keep more of their assets. And it is far better to consider taking action sooner rather than later to ensure that securing these benefits isn’t put into jeopardy by another legislative action.

For individuals who have previously reached the $5,490,000 gift tax or generation-skipping transfer tax exemption, they now have the opportunity of gifting another $6,090,000 (or double this in cases of married couples) to family members. Individuals can also bestow gifts within these limits to grandchildren or more distant descendants without incurring the 40% tax rate.

The increase in federal exemptions provides individuals with opportunities to retain more control of their assets for generations to come. In addition to this, the annual exclusion gifting amount has remained steady in 2020 at $15,000 per donee (or $30,000 per donee if spouses split gifts), which remains subject to indexing in future years.

The increase in the exemption amount open opportunities to employ several techniques that can maximize a family’s control over its wealth, including:

• Allowing those who have previously reached the limit to double their amount of gifts, including those made to generation-skipping trusts.
• Selling assets to intentionally defective grantor trusts (IDGT), which allow the grantor to continue making tax-free gifts to the trust.
• Creation of a Dynasty Trust, which is a perpetual trust that is intended to last for many generations, usually beyond the individuals’ lifetime.
• Making intra-family loans or cast gifts to operate as a prepayment of existing loans from senior family members.
• Employing a Grantor Retained Annuity Trust (GRAT) to remove appreciation from your taxable estate.

Considerations for Estate Planning

While it is clear that undergoing estate planning activities and transferring any additional wealth and assets now is one of the biggest actions you can take to make a positive impact on your family’s financial future, there are several other considerations to keep in mind.

The federal exemption is the only one impacted by this change; state tax law can vary from state to state - some of which altered their existing gift and generation-skipping transfer limits, while others didn’t. If you are uncertain about your state gift tax limits and rates, you should contact an estate planning attorney for more information.

But perhaps the most significant thing to remember is that the increased exemption limit is temporary. It has an expiration date, and while it may seem like you have plenty of time to reduce your taxable estate, it’s important also to realize that one-quarter of the allotted time for this temporary change has already lapsed. While you had eight years to make changes on January 1 of 2018, you have less than six years left to take action. If you haven’t done so already, it’s time to begin or expand upon your estate planning activities to ensure that you are optimizing your transfers of wealth.

What Exactly Is the Estate Tax?

“The estate tax in the United States is a tax on your right to transfer property to other individuals upon your death, according to the IRS. In other words, when you die, the U.S. government might be entitled to a portion of your assets before the remainder can be passed to your heirs. Not all inherited assets are subject to the estate tax. In fact, the U.S. estate tax only affects the wealthiest households.”

In the U.S., we treat the estate tax and gift tax as a single tax system with unified limits and tax rates—but it is not very well understood by many people. The Motley Fool’s recent article entitled “What Is the Estate Tax in the United States?” gives us an overview of the U.S. estate and gift tax, including what assets are included, tax rates and exemptions in 2020.

The U.S. estate tax only impacts the wealthiest households. Let’s look at why that’s the case. Americans can exempt a certain amount of assets from their taxable estate—the lifetime exemption. This amount is modified every year to keep pace with inflation and according to policy modifications. This year, the lifetime exemption is $11.58 million per person. Therefore, if you're married, you and your spouse can collectively exclude twice this amount from taxation ($23.16 million). To say it another way, if you’re single and die in 2020 with assets worth a total of $13 million, just $1.42 million of your estate would be taxable.

However, most Americans don't have more than $11.58 million worth of assets when they pass away. This is why the estate tax only impacts the wealthiest households in the country. It is estimated that less than 0.1% of all estates are taxable. Therefore, 99.9% of us don't owe any federal estate taxes whatsoever at death. You should also be aware that the lifetime exemption includes taxable gifts as well. If you give $1 million to your children, for example, that counts toward your lifetime exemption. As a result, the amount of assets that could be excluded from estate taxes would be then decreased by this amount at your death.

You don't have to pay any estate or gift tax until after your death, or until you've used up your entire lifetime exemption. However, if you give any major gifts throughout the year, you might have to file a gift tax return with the IRS to monitor your giving. There's also an annual gift exclusion that lets you give up to $15,000 in gifts each year without touching your lifetime exemption. There are two key points to remember:

• The exclusion amount is per recipient. Therefore, you can give $15,000 to as many people as you want every year, and they don't even need to be a relative; and
• The exclusion is per donor. This means that you and your spouse (if applicable) can give $15,000 apiece to as many people as you want. If you give $30,000 to your child to help her buy their first home and you're married, you can consider half of the gift from each spouse.

The annual gift exclusion is an effective way for you to reduce or even eliminate estate tax liability. The estate tax rate is effectively 40% on all taxable estate assets.

Finally, the following kinds of assets aren’t considered part of your taxable estate:

• Anything left to a surviving spouse called “the unlimited marital deduction”;
• Any amount of money or property you leave to a charity;
• Gifts you've given that are less than the annual exclusion for the year in which they were given; and
• Some types of trust assets.

If you have any questions about your current estate plan, please call or email us today.

Reference: The Motley Fool (Jan. 25, 2020) “What Is the Estate Tax in the United States?”