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Will gift-giving during life be part of your estate plan?

On Behalf of | Oct 29, 2024 | Estate Planning

When most of our readers in Maryland and the D.C. area think about estate planning, they probably think mostly about establishing plans for what happens to their assets after death. But, any comprehensive estate plan will also include documents that provide direction for potential situations that can arise even while the planner is still alive. Power of attorney documents, for example, are intended to empower another person to make financial or health decisions on your behalf if you are unable to due to some kind of incapacitation. What other parts of an estate plan might include moves to make during life?

As a recent news article mentioned, gift-giving can play an important role in many estate plans. In short, the purpose of gift giving is oftentimes thought of as a way to accelerate the distribution of your assets to your chosen heirs and beneficiaries. Basically, those heirs and beneficiaries don’t have to wait until your assets are distributed after death to benefit from your intention to leave them some inheritance.

Gift-giving parameters

The recent news article mentioned one important gift giving parameter: the IRS regulation that allows for an annual gift to another person that is tax free. Currently, the maximum amount that can be gifted is $18,000 to an individual, twice that to a married couple. Neither the donor nor the recipient will be taxed on this money move. Additionally, there are a couple of other ways to gift funds to another person as part of your comprehensive estate plans. First, you can donate to another person’s 529 plan, which are savings plans for college education. Next, you can directly pay another person’s medical bills – and doing so cannot be taxed, if proper conditions are met.

Estate planning takes time when you are considering how best to make sure your intended heirs and beneficiaries will receive your assets. And, plans can change and often need to be updated. Perhaps gifts made during life could be an option to consider.