Estate Planning for Blended Families
Due to the high rate of divorce in this county, it is not uncommon for individuals to be married two or more times. Such remarriages frequently involve children, be it children born to a prior marriage and/or children born to the current marriage. However, with the divorce rate for second marriages exceeding 60 percent, it is important for those persons who are remarried with children to have plans in place to protect their children and their assets.
Gifts may shield assets from creditors (subject to laws regarding fraudulent transfers)
Gifts may decrease the donor’s estate tax liability
However, inter vivos gifting is not an estate planning tool that can be used at the last minute as a solution to an asset protection problem. Such gifting must be undertaken much farther in advance to achieve maximum effectiveness.
Under current tax law, each individual has a combined gift and estate tax exemption of $5,250,000 (it is unknown how long such exemption will continue, given the country’s $16.75 trillion deficit and the government’s need for revenue; proposals have been circulated to reduce the $5.25 million exemption to $2 million). Additionally, each donor can make up to $14,000 ($28,000 per couple) in gifts per donee per year without triggering gift taxes. In addition, other types of gifts may be made completely tax-free, including:
Gifts to your spouse
Payment of school tuition for a loved one
Payment of medical expenses for a loved one
Donations to political organizations
Donations to charities
Of course, when undertaking a gifting program, it is important to keep enough assets to maintain your standard of living.
Please contact our office if you are interested in, or have any questions, establishing a gifting program.