Texas residents (and folks from other states, as well) harbor a number of misconceptions about wills, trusts, and estate planning. One all too common notion is that estate planning is a “once done, put it away” type of matter. That is to say that many folks meet a few times with their investment advisers, talk matters over with an attorney, sign some documents, and park the wills and trusts in a lock box, without much thought thereafter about “the plan.” In all truth, however, while appropriately drafted documents are vital to the preservation of an estate and to the distribution of property following death, the “planning” never really stops.

In fact, most persons with modest-sized and larger estates generally benefit from a specific, annual program of giving to members of the family. Here are four points to keep in mind.

Point 1: The Estate and Gift Tax Exemption May Be Less Than You Think

According to regulations released by the Internal Revenue Service late in 2015, the estate and gift tax exemption is $5.45 million per individual, up from $5.43 in 2015. That is to say, an individual can distribute $5.45 million to his or her heirs (and others) and pay no federal estate or gift tax. That sounds like a lot and in a true sense it is. On the other hand, if you own substantial real estate, or have a strong ownership interesting in a successful business, that exclusion figure may quickly be reached.

Point 2: Gifts up to $14,000 Can Be Made Without Reducing the Exemption Amount

In addition to the $5.45 million lifetime exclusion, one may give an individual up to $14,000 annually, without any gift tax liability. One can allow any investment growth related to that $14,000 asset to be taxed at the beneficiary’s income tax rate, instead of the giver’s. Even in Texas, which has no income tax, this still can save money if your children are in lower federal tax brackets than you.

Point 3: Assets That Have Already Appreciated Need Careful Attention

If you have assets that have already appreciated, you will want to be careful. While it may be advantageous from a federal income tax aspect to pass the assets along now, one should not forget the “stepped-up basis” that occurs when the appreciated property is inherited (the heir gets a basis as of the date of death, instead of the lower basis that the original owner had).

Point 4: Specialized Trust Instruments Can Be Utilized to Meet Your Needs

If your children are too young or inexperienced to manage the gifts on their own, trusts can be utilized to meet your needs of moving the property out of your estate, all the while protecting the assets for the future.

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Annual Family Giving is a Great Part of an Estate Planning

One of the additional benefits of annual giving to family members is the fact that you get to see the difference your gifts make in the lives of your loved ones; testamentary devices provide no such satisfaction. The attorneys at Romano & Sumner, LLC have more than 20 years of combined experience providing expert legal assistance to clients in all types of estate planning and administration transactions. We developed many successful estate plans, and have crafted wills and trust instruments that meet the individual needs of our clients. At Romano & Sumner, we take pride not only in our professionalism, but also our client service. We know that each situation is unique. We return phone calls within one business day. We keep clients informed. We complete the work within the allotted time frame. Call us at 281-242-0995 or complete our online contact form.