Estate Planning Tips for the Beginning of 2021

After all of the uncertainty and ups and downs of 2020, how can we plan ahead for all of the repercussions and changes 2021 has in store for us?


Here are a few tips for setting your estate plan up for success ahead of time.


Annual Exclusion

The gift tax annual exclusion currently allows an individual to give $15k to any number of people in a given year as long as it is a gift of a present interest. 


However, due to the financial struggles so many individuals and families have faced during the pandemic, we are seeing more children, parents, grandparents, and other family members wanting to give excessive amounts to their loved ones who are struggling to make ends meet due to job loss, medical bills, etc. Right now, the best way for them to do this is through the gift tax annual exclusion.


You can learn more about this tool here


Low-Interest Loan to Children

It’s time to take advantage of the remarkably low-interest rates that have resulted from the pandemic! Rather than simply handing your children a lump of cash, you may want to consider providing them with a low-interest loan for them to invest instead. This will give your child an opportunity to grow their wealth over the years while interest rates are in their favor.


Estate and Medical Expenses

Lastly, let’s talk about how you pay for tuition or medical expenses for your loved one. The Internal Revenue Code Section 2503(e) provides two ways for individuals to transfer funds without having to deal with estate-tax or gift-tax consequences for these matters specifically. 


When it comes to paying for your loved one’s tuition under this provision, the caveat is that the payments must be made directly to the provider. For example, if you intend to pay for your grandchild’s tuition, you must personally write the check and send it directly to their college. No middle man allowed!


It’s a very similar situation for medical expenses as far as sending payments directly to the provider. It’s important to note that there are many different payments that this exclusion can cover, not just medical bills. These payments can include costs for a caregiver, long-term care insurance, assisted living and/or nursing home expenses, etc.


Estate Planning with Lefkoff Duncan

Are you getting ready to update your estate planning documents as the new year unfolds? Lefkoff-Duncan is here to help. Our experienced team will assist you in all of your estate planning endeavors so that you’ll never again need to wonder if you’ve done enough to take care of the ones you love.