Response To Estate Tax: Educational Gifts
You may have heard that the estate tax exclusion was raised to $5 million with a
maximum tax rate of 35% as a result of the passage of the Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of 2010. This could potentially lead
you into a false sense of security, thinking that you are not exposed to the estate tax
because your estate is not worth this much. Before you get too comfortable you may
want to recognize the fact that the present estate tax parameters are not permanent.
This tax act that was passed at the end of last year is scheduled to expire at the end of
2012. If it does sunset without any new legislation being passed to replace it, the
maximum estate tax rate is going to go up to 55% and the exclusion is going to be
reduced to just $1 million. So in reality, if it would appear as though you're going to live
beyond the end of next year and your estate is worth more than $1 million it is indeed
exposed to a federal death levy poised to take more than half of that taxable portion.
One appropriate response would be to take steps to reduce the overall taxable value of
your estate. Gifting is probably going to be your first thought, but there is a gift tax in
place and its rate mirrors that of the estate tax. However there are some gift tax
exemptions that can be utilized and one of these allows for making educational gifts.
Each taxpayer may pick up the tuition costs of any number of gift recipients without
incurring any gift tax liability. Considering the high cost of education these gifts can
whittle down the value of your estate considerably. Simultaneous to achieving this goal
you would also be offering some of your loved ones an opportunity to gain an
educational foundation that will serve them in good stead for the rest of their lives.
Experienced estate planning attorneys Oklahoma City OK of the Parman and Easterday
offers estate planning and business planning resources to residents of Oklahoma City
OK. To learn more about these free resources, please visit www.parmanlaw.com/ today.