Make gifts to your child - save $3.625 million in tax

Was working with a family this week. The parents want to do whatever they can legally do to avoid federal estate tax. We don't know what Congress will do with the estate tax in the future, but let's assume they keep it. Let's look at how much estate tax savings would result from making annual exclusion gifts to your child.

Let's say the parents are 50 years old. They start now by giving $24,000 annually to their child - or to an irrevocable trust for the child's benefit. Let's further assume that the child (or the trustee) invests the gifted funds and earns a 10% investment return. If the parents continue the annual gifting at $24,000 per year and die at the age of 85, and assuming the child or trustee continues investing the gifts, then when the parents die, the child (or the trust) will have assets totalling $7,251,508. If those assets would have remained in the parents estate - and if the estate tax rate was 50% - then the family saved over $3,625,000 in federal estate tax.

We work with people in our office who like avoiding tax. If you want to know how you can legally and ethically plan ahead and provide for your children and grandchildren, then give me a call at (225) 329-2450, or send me an e-mail at paul@rabalaislaw.com

Paul Rabalais