2013 Annual Gift Exemption Rises to $14,000
The IRS announced today increases to various tax benefits for 2013, including an increase in the annual gift tax exclusion from $13,000, per person to $14,000. http://content.govdelivery.com/bulletins/gd/USIRS-57e79e?reqfrom=share
Use of the annual gift tax exclusion is an important part of many estate plans, as it offers and easy way to transfer money out a client’s taxable estate, while at the same time providing a substantial benefit to families. These gifts can be made outright, or can be made to one of several types of trusts that will either hold the annual gifts for future distribution, or will utilize the annual gifts to purchase large life insurance policies on the life of the client. Then, when the client passes, the life insurance payout provides a large inheritance to the heirs. These types of trusts that utilize the annual gift exemption are often called “Crummey” trusts and/or “ILIT’s” (Irrevocable Life Insurance Trusts) if they are used to purchase the insurance described above. All perfectly legal and commonly used.
With the coming dramatic decreases in the available Estate, Lifetime Gift, and Generation Skipping Tax Exemptions (explained in our Estate Tax planning page:Estate Tax planning), the use of the annual gift exclusion will become an increasingly important tool. Please contact us to learn about how we might help you use this technique.