If a person has assets at the time of his or her death, those assets are subject to estate taxes. To reduce the amount of taxes, many people choose to make charitable donations and gifts during their lifetimes. However, tax laws can rescind some of these gifts, imposing estate taxes on them if they are made close to the date a person passes away. Within this article is some basic information on estate planning in Jenison MI and the three-year rule.
How Estate Tax Laws Handle Gifts Within Three Years of the Date of Death
When a person gives away his or her property without pay within three years before death, estate taxes are levied upon the property, even though the person did not own the asset at the time of death. For this rule to stand, the property must have been taxable if it had not been given as a gift. If you make a gift within three years of your death that does not exceed the annual tax exclusion limit, the gift will not be used to calculate estate taxes.
Are There any Available Exceptions to the Three-Year Gift Rule?
If a revocable trust is used, the three-year rule can be avoided. In a revocable trust, a person remains in control of the assets within the trust. For the purposes of estate taxes, the person creating the trust has to pay taxes on the assets if they want to retain control of the trust until death. The three-year rule doesn’t apply if the grantor of the trust gives the assets to someone else, and the gift will not be used in the calculation of estate taxes even if made within three years of the date of death.
For estate planning in Jenison MI that suits your needs and protects your family, you should consult with an estate planning attorney as soon as possible. Such a lawyer will know what type of trust or will is best for your situation, and he or she will do everything possible to reduce or eliminate your estate tax liability.
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