What to Know After the Increase in the Annual Gift Tax Exclusion
If you would like to learn more about the increase in the annual gift tax exclusion, continue reading and reach out to our firm today to speak with one of our dedicated and experienced Butler County estate planning & probate attorneys
What is the increase in annual gift tax exclusion?
Recently, beginning in 2022, the annual exclusion for federal Gift Taxes was increased to $16,000 per individual annually. Even though a near-universal acceptance exists that gift-giving can play an important role in estate planning, a person should evaluate a number of matters before making gifts.
This is because the way that gifts are made can have a big impact on beneficiaries. This is especially accurate if the party who accepts a gift is below the age of 21. Direct gifts made to young people can have their own challenges which include exposure to creditors and limited control over how gifts are created. As a result, it’s a wise idea in these situations to consider placing gifts in a trust.
What is the danger behind direct gifts?
When gifting assets to a beneficiary, it can leave a gift vulnerable to several risks. Direct gifts are subject to any creditors attempting to collect money from a beneficiary and can be at increased risk in case of a divorce. If a beneficiary passes away and has an incomplete estate plan, unanticipated beneficiaries could obtain these assets or other obstacles may surface.
If you have questions about how this may impact you and your estate plan, it is in your best interest to reach out to our Butler County estate planning attorneys. Our legal team is committed to ensuring you are making informed decisions to protect your and your family’s future.
How can I use custodial accounts?
In the event that the individual receiving a gift is a minor, a custodial account can provide some assistance in structure. The degree of flexibility provided by custodial accounts, however, has its drawbacks. For instance, many times when the subject of a custodial account reaches the age of 18 or turns 21, all assets in a custodial account are instantly passed on to the recipient, which includes all investment and management choices. After this happens, nothing stops a recipient from wasting the custodial account or making unwise investment choices. Another potential challenge is change in custodians following death or incapacity before a beneficiary reaches the age of 21.
CONTACT OUR EXPERIENCED PENNSYLVANIA FIRM
Whether you are dealing with matters involving estate planning, estate administration, or elder law, you need a legal team that you can feel confident will represent your best interests, every step of the way. We are that legal team. Contact Heritage Elder Law & Estate Planning today so we can get started.
