3 Common Gifting Mistakes

Tis the season to be gifting...or so many of the headlines would suggest these days. Gifting can be a very effective estate planning tool, and for some, it accomplishes their more personal objective of providing for their children and/or other loved ones when they need it most (which could be now).

That being stated, some of the new stories would suggest that the gifting opportunities exist for everyone. This is concerning, because there may be pitfalls associated with a gifting strategy, and very few articles really discuss any of them.

So, before you engage in any major gifting initiative this year, you should discuss it with your estate planning attorney and tax advisor. Time is of the essence as we draw nearer to 2013, so keep that in mind as you prioritize.

While this is by no means an all-inclusive list, here are 3 gifting pitfalls to be aware of:

  1. outright gifts without risk evaluation - gifting gifts outside of trust to your children or loved ones may end up with unfortunate consequences. Assets held outright may be subject to creditor attack, loss in a divorce, or other lawsuits. Nobody wants to think these things can happen to their children, but they happen every day.
  2. implementing specific gifting strategies without understanding pros/cons - for example, there are ways to remove assets from your estate for tax purposes that provide spousal access to the assets, but depending on the strategy, you may lose access if your spouse passes before you. This consequence may be countered by the use of complementary strategies. The moral of the story here is that you should be in discussions with your attorney and tax advisor to ensure that you understand the benefits and drawbacks of any particular gifting strategy.
  3. gifting without taking into account State taxes - Connecticut has a gift tax. Make sure that you have discussed potential CT gift tax ramifications with your tax advisor and attorney before assuming that you can do what any news article suggests you can do; many of these articles are written with only Federal laws in mind.

If you have any questions about any of this general information, or would like to discuss an appropriate gifting strategy given your specific circumstances, you can reach out to our office to set up a consultation. Our contact information is on our website here.

Categories: Estate Planning, Gifting, Taxes