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The Heritage Law Center, LLC Blog

Avoid Estate Tax and Preserve Your Family Legacy Through Gifts

POSTED ON: July 24, 2017

There’s a great feeling of satisfaction that comes with giving.  Being able to help your loved ones through major life events and financial transitions can be a very rewarding experience.   Did you know that gifting not only helps your family while you are still alive but also helps shield you from estate tax?  With careful planning, gifting can be a great way to lower your estate value and financially assist your family when they need it.

How much can I give?

  • Every year you can give up to $14,000 to any individual person without being subject to gift or estate taxes.  This person doesn’t have to be an heir, nor does it have to be related to you.  You can do this for multiple people each year while still reducing your taxable estate.
  • Everyone gets a lifetime federal estate and gift tax exemption of $5.49 million for 2017 (this number adjusts yearly for inflation). Married couples can combine this exemption to almost $11 million.  Anything over this amount is subject to a flat 40% rate. 
  • 18 states, including Massachusetts, have an additional state estate tax. The Massachusetts state estate tax exemption is much lower than the federal exemption and is not adjusted for inflation.  Individuals with their estates valued over $1,000,000 or $2,000,000 for married couples are subject to a graduated tax anywhere between 0.8% and 16%.

Gifts Excluded from the Gift Tax

There are plenty of ways to give so that your assets aren’t counted towards the estate tax exemption.  The following monetary gifts should be excludable:

  • Educational expenses, as long as they are paid for only tuition (books and living expenses aren’t included)
  • Medical bills (as long as the money is only used for medical expenses)
  • Charitable donations

Budget your Donations Wisely

Giving generously under these guidelines can be a great way to help loved ones and shrink your  taxable estate value, but careful budgeting is important.  Make sure you have set aside enough so that you can live comfortably while paying your expenses, and also to be prepared for emergencies and changes in your expenses.

When used wisely, gifting can be a great way to preserve your legacy and make an impact in your family’s life while you are still alive. 

For more information on managing your estate and gifting, please contact Attorney Matthew Karr at 617.299.6976 or mkarr@maheritagelawcenter.com.