Uniquely Qualified Estate Planning And Probate Attorneys

Can I save on taxation by giving away part of my estate?

On Behalf of | Mar 11, 2021 | Estate planning |

When it comes to your estate, you must think about everything that will happen once you die. This includes what your heirs may have to do to receive their inheritance. 

You probably created your estate plan to ensure things go smoothly, but did you consider the impact of taxes? The government at every level may try to get a portion of your estate by charging a range of taxes to the estate and to your heirs. You need to plan ahead to find ways to minimize the tax burden your heirs will face, and Turbo Tax explains one option you have is to give away part of your estate now while you are still alive. 

Reasons to gift it out

You may wonder why you would want to give away part of your estate when you want it to go to your heirs. It may seem silly because your heirs will lose part of their inheritance if you give it away now just as they would lose part of it when paying taxes. However, it is not an even comparison. 

In many cases, you can give away a small amount of your estate that will not be equal to the loss your heirs will have through taxation. Essentially, you could plan it so that your heirs actually get more inheritance because you lowered the tax burden so much through gifting out part of your estate. 

How to do it

The best way to give away part of your estate to offset taxation is to give to a charity. By doing this, you will get a tax deduction for charitable giving. 

You can also give the money to your heirs. The state has a specific limit on such gifts that you can give, but you can do this each year. It will lower your tax burden while putting the assets into the hands of your heirs directly.