Illinois Estate Planning and Elder Law Blog
One simple way you can reduce estate taxes is to give some of your assets to your children (or anyone else) during your life. There is no limit on how much you may give during your lifetime, but if you give any individual over $14,000 (in 2016) in one year, you must file an IRS Form 709 reporting the gift to the IRS. The amount over $14,000 will be counted against the $5.45 million lifetime tax exclusion for gifts.
The $14,000 figure is an exclusion from the Form 709 reporting requirement. You may give $14,000 to each of your children, their spouses and your grandchildren (or to anyone else you choose) each year without reporting these gifts to the IRS. In addition, your spouse can duplicate these gifts. For example, a married couple with four children can give away up to $112,000 in 2016 with no gift tax implications and no need to file anything with the IRS. However, if spouses elect to split a gift of $28,000 to one individual, Form 709 must be filed for both spouses to use the $14,000 exemption.
So an individual with $6 million in assets and two children and two grandchildren could gift to them in one year $56,000 (4 times $14,000) without filing anything with the IRS. If that individual made these gifts for ten years, he would have reduced his $6 million in assets to a figure under the current $5.45 million exemption and would owe no Federal Estate Tax at his death.Consult your estate planning attorney for further information.