When To Gift: Understanding the Subtleties of Strategic Timing in Estate Planning
There isn’t a ‘one-size-fits-all’ answer to this question, as it depends on a variety of factors, including your financial stability, the recipient’s needs, and tax considerations. However, in general, it is wise to make gifts early in the calendar year. This is because the Internal Revenue Service (IRS) allows for annual gift tax exclusions, meaning that individuals can gift a certain amount each year without being subject to gift tax. By gifting earlier in the year, you utilize your exclusion sooner, allowing the assets to grow outside of your estate and potentially escape estate taxes later.
In terms of holidays or events, Christmas, birthdays, and weddings are common times people choose to make gifts. These are not only times of celebration but can also provide an advantageous context for reducing an estate’s size over time while spreading joy to your loved ones.
How Does Trust Creation Date Affect Gifting?
The creation date of your trust plays a significant role in determining when to gift. When you establish a revocable living trust, you are essentially transferring ownership of your assets to the trust. As the trustmaker, you have control over these assets during your lifetime and can alter the trust’s terms at any point.
Gifting from your trust rather than your personal assets can have unique benefits. It allows you to retain control over the gift while living and, in some cases, can offer better tax advantages. If you establish a trust later in the year, you might consider waiting until the following calendar year to begin gifting, allowing the trust to be fully operational and your assets to be correctly titled in the trust’s name.
Remember, the world of gifting and trust creation is complex, and every situation is unique. To ensure that your gifting strategy is tailored to your personal goals and circumstances, it’s recommended to consult with an estate planning attorney. With their guidance, you can make well-informed decisions that contribute to effective tax planning and wealth preservation.