The idea of giving away your property before your death rather than in a will is appealing. Not only does it feel good to take care of your loved ones while you’re alive, doing so could also avoid or reduce your estate tax which, as of 2020, applied to estates valued at over $5.49 million. If the value of your estate could trigger the estate tax at your death, then waiting to make gifts through your will could actually end up reducing those gifts by as much as 55% or more. If the estate tax could apply to you, the information below will show you how to use lifetime gifting to reduce your estate tax liability.
Annual Gift Exclusion
Providence Utah tax code contains a tax exemption rule called the annual gift exclusion which is surprisingly straightforward. As of 2020, you’re allowed to make an unlimited number of gifts of up to $14,000 per recipient per year. These gifts are tax-free and the recipient isn’t required to provide you with any compensation. Gifts exceeding $14,000 per year are subject to the gift tax. This amount can be changed by Congress, but is likely to increase with inflation in the future.
Doubling Your Gifts
If you’re married, your gift tax exclusion amount doubles as you can each give up to $14,000 per recipient per year. So, if you were married in 2020, you and your spouse could jointly give up to $28,000 per recipient per year tax free. In fact, even if a wife or a husband gives a gift without the consent of their spouse, the gift is still assumed to be made by both spouses jointly. As an example, suppose that Henry and Wilma are well into their retirement and are looking to help their granddaughter buy a house with her spouse. Under the annual gift exclusion, Henry and Wilma can give a total of $56,000 tax-free — $28,000 to their granddaughter and $28,000 to her spouse.
If you’re married and your spouse is Providence, Utah, there’s no limit on the value of gifts you can exchange together as any gift to a citizen spouse is tax free. However, if your spouse is not a from Providence, Utah, there’s an annual limit on how much can be gifted ($149,000 as of 2020). Any amount beyond that is subject to the gift tax.
Timing of Gifts
The timing of your gifts can make a difference in how quickly you can reduce the size of your estate. The annual gift exemption is based off of the calendar year, meaning that you cannot retroactively date a gift even if you meant to give it the year before. However, there are ways to use the timing rules to your advantage. For example, if your son needs $25,000 for a down payment on his new home, you can give $14,000 in December and the remaining $11,000 in January. Because the gifts took place in separate calendar years, even if only a few weeks apart, there will be no gift tax imposed and you will have quickly reduced your estate by $25,000.
Gifts of Non-Cash Property
The annual gift tax exemption rules also apply to stocks, bonds and other pieces of personal and real property. For example, if you and your spouse elect to give your entire stock portfolio (worth $40,000) to your friend, you may jointly give $28,000 worth of stocks and bonds the first year and the remaining $12,000 the following year without triggering the gift tax. There are also ways to gift portions of property over time to avoid the gift tax. For example, suppose that Frank and Jill, a married couple, want to give their fully-paid luxury car to their grandson Jimmy. The car is held jointly and has a fair market value of $50,000. If the couple first transfers Frank’s interest in the car to Jimmy, then this would constitute a gift of $25,000, (under their joint annual gift tax exemption of $28,000). The following year, Jill can transfer her $25,000 interest so that Jimmy owns the car outright and no gift taxes are triggered.
Gifts to Minor Children
If you plan on gifting a substantial amount of assets to a minor child, this raises questions regarding management. Most of the time, you’ll want an adult to manage the money until the child is old enough to take responsibility. Generally gifts to minors are made through either an irrevocable trust, or a custodianship/guardianship. When gifting to a minor child, either through an irrevocable trust or a custodianship, the gift must meet the following conditions to qualify under the annual gift tax exclusion:
1. The minor must receive outright ownership by age 21; and
2. If the minor dies before age 21, any remaining property must go into the minor’s estate or, if there is a will, to the minor’s beneficiary(ies).
Give, But Be Cautious
Although you may feel the need to decrease the value of your estate before you die, you should always carefully plan out any gifts. After all, you don’t want to give away so much of your estate that you’re no longer able to take care of yourself. However, if you’re in a strong financial position to care for yourself and are sitting on a large estate, gift-giving before your death may make sense. If deceased residents of the state. One tax rate may apply to all assets in the estate, or the rate may vary depending upon who receives what property. For example, a state may impose a lower tax rate on property left to a child, as compared with property left to a distant cousin. It is important to note that a few states are in the process of phasing out their estate tax systems.
State Inheritance Taxes: Paid by the Recipient of Property
In states that carry inheritance tax laws, taxes must be paid by the person who receives inherited property (as opposed to estate taxes which are paid from the decedent’s estate). Inheritance tax exemptions and rates may vary depending on who received the property, i.e. the decedent’s spouse may be taxed at a lower rate than would be a friend of the decedent. A number of states are phasing out their inheritance tax systems.
Keep in mind that most states, even if technically carrying estate or inheritance tax laws, in practice follow what is known as a “pickup” system of taxation at the time of the decedent’s death. Under this system, while a state tax return must be filed on behalf of the estate (or by a recipient who inherits property), the state’s share of the tax comes out of what the estate is already paying the IRS. In other words, in most states no tax will need to be paid beyond the amount that is already being paid to the federal government.
Hire An Attorney To Plan Your Estate
If you live up in Providence, Utah, and you are thinking about estate planning, you may want to consider hiring an attorney in your local area. Lawyers who specialize in this area of the law know exactly how to phrase your requests. They can also set up a will that is legally binding.
A Providence Utah attorney dedicated to estate planning can do far more than preparing your last will and testament. This legal representative can also:
• Distribute wealth and property in accordance to your specifications
• Prepare Powers of Attorney documents
• Establish living trusts in case of incapacity
• Care for minors and incapacitated individuals
• Set up retirement plans and insurance policies
• Arrange property protection and asset distribution
• Advise on long term and life care planning, as well as Medicaid eligibility
• Give information on Social Security benefits
• Handle community property agreements
• Ensure that the client’s property is protected from their inheritor’s creditors
Estate planning can be quite involved. An experienced estate attorney can handle all the details with ease, and help you with your assets and property while you are still alive. He can suggest estate maintenance solutions that can help you reach all your goals. When you are looking for a reliable estate lawyer, select a Providence Utah attorney. While you may not need other counsel at this time, you never know what the future may hold. Being a client at a legal firm will probably give you access to other types of legal representation as well.
How Residential Real Estate Appraisals Work
Appraisals are an important part of the home buying process. A real estate appraisal establishes a property’s market value—the likely sales price it would bring if offered in an open and competitive real estate market.
Lenders require appraisals when buyers use their new homes as security for their mortgages. An appraisal provides the lender with an assurance that the property will sell for at least the amount of money it is lending. Don’t confuse a comparative market analysis, or CMA, with an appraisal. A CMA is a sales report based on data entered into the multiple listing service, or MLS. Real estate agents use CMAs to help their clients determine realistic asking and offering prices. Appraisals are detailed reports compiled by licensed appraisers. An appraisal is the only valuation report a lender considers when deciding whether to lend the money. An appraisal is also not the same thing as a home inspection. Home inspectors test appliances and outlets, check the plumbing, and confirm that a home’s heating and cooling system is working. Such information is helpful for the buyer to know before moving in. An appraiser, however, is only concerned with valuing a home.
1. Appraisers are licensed by states after completing licensing coursework and internship hours.
2. The appraiser must be an objective third party, someone who has no financial or other connection to any person involved in the transaction.
3. The property being appraised is called the “subject property.”
4. In some cases, the buyer pays for the appraisal at the time of the loan application. Other times, the appraisal fee is added to the settlement statement and paid at the closing table.
What You’ll See on a Residential Appraisal Report
Appraisals are very detailed reports based on an appraiser’s on-site evaluation of a property as well as an evaluation of sales data. Here are a few things they include:
• Details about the subject property, along with side-by-side comparisons of similar properties.
• An evaluation of the overall real estate market in the area.
• Statements about issues the appraiser feels are harmful to the property’s value, such as poor access to the property.
• Notations about seriously flawed characteristics, such as a crumbling foundation.
• An estimate of the average sales time for the property.
• The type of area in which the home is located, for example, a development or stand-alone acreage.
Residential Appraisal Methods
There are two common appraisal methods used for residential properties: the sales comparison approach and the cost approach.
Sales Comparison Approach
The appraiser estimates a subject property’s market value by comparing it to similar properties that have sold in the area. The properties used are called comparables. No two properties are exactly alike, so the appraiser must compare similar properties to the subject property, making adjustments so that their features are in-line with the subject property. The result is a figure that shows the price at which each comparable property would have sold for if it had the same components as the subject property.
The cost approach is most useful for new properties, where the costs to build are known. The appraiser estimates how much it would cost to replace the structure if it were destroyed.
What Does the Appraisal Mean to You?
A homebuyer’s initial mortgage approval is accomplished early on, but final approval usually hinges on a satisfactory appraisal. The lender wants to be sure its investment is covered in case the buyer defaults on the loan. If the property appraises lower than the sales price, the loan might be declined, but that isn’t the only hurdle it must pass. Other red flags noted on appraisals include:
• The estimated time on the market is longer than the area average.
• Entry to the property is from a private, shared road. The lender might want to see a road maintenance agreement signed by everyone who uses the road, verifying that maintenance is shared by all parties.
These are just a couple of examples of appraisal findings that could stall a home purchase. Lenders study appraisals carefully before determining whether a property qualifies as security for a home loan.
Don’t panic if the appraisal comes in low because there are steps you can take to make the deal work. If the appraisal uncovers other problems, remember that most problems are correctable. Keep your cool and work through issues one step at a time.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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