Protect Your Assets by Having a Will or Trust in Place

Has a client decided to leave their bank account or entire estate to one of their children, who will “do the right thing, and distribute it equally among all of my children”? Discuss with your client that this scenario creates 2 problems: 1) Child receiving the account/inheritance is not legally obligated to give any of the assets to client’s other children; and 2) Child may suffer gift tax consequences if they honor client’s wishes to give part of what they receive to client’s other children. In 2019, each individual may gift $15,000 to another individual in 2019, without filing a Form 709 Federal Gift Tax Return. This is referred to as the “annual exclusion amount.” If the amount given to another individual is over $15,000, a gift tax return is required to be filed on April 15 of the year following the gift. Any amount over $15,000 is subject to gift tax. Each individual has an $11.4 million federal lifetime gift and estate tax exclusion amount, which can be allocated to amounts over the $15,000 annual exclusion amount, but again, a Form 709 Federal Gift Tax Return is required to be filed. Bottom line: Talk to your client about having a properly prepared Will or Trust in place so that assets pass directly to their loved ones at death, rather than taking “short cuts” that create tax issues for their loved ones, and worse, may be unenforceable. For further information, contact Joan Skrzyniarz in the Troy, Michigan office at 248-433-7521.