For taxpayers who have a moderate to large estates, one estate planning tactic that is often used is to make gifts during the taxpayer’s lifetime in order to reduce the value of the estate at the time of death. Making lifetime gifts also allows the person making the gift to watch the recipient enjoying the gift. If you elect to make significant lifetime gifts, however, be sure that you ascertain a value for the gift as of the date the asset was gifted.
All gifts made during your lifetime are potentially subject to estate and gift taxes. Gifts up to $14,000 (as of 2013) made to a single beneficiary are exempted from gift taxes pursuant to the yearly gift tax exemption. In addition, gifts up to $5 million (adjusted yearly for inflation) that are made over your lifetime are excluded from gift and estate taxes. The key to minimizing your gift tax exposure is to gift the right asset at the right time. To do this, you need an accurate value for the asset.
Some non-cash assets, such as stocks or bonds, are easy to value. Many others though are not so easy to value. An unusual collection, for example, may be difficult to value a can a piece of artwork or a family heirloom. For this reason, finding the right independent appraiser is critical. Take your time and speak to your estate planning attorney if you are concerned about providing an accurate value for a gift as you do not want the IRS to challenge the value you claim.
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