Dear Liz: You recently answered a question about what a wealthy couple could do to reduce future estate taxes, and you mentioned the annual exclusion. They also could pay education and medical expenses for anyone, and there’s no annual limit.
Answer: Absolutely — and the couple’s estate planning attorney almost certainly would have informed them of this option.
The original letter came from one of the couple’s children, asking what their parents could do to reduce future estate taxes, in addition to the irrevocable trust that already had been set up. The reader lamented that the estate was bigger than the current exemption limits (now $10.98 million for a married couple) and so could incur estate taxes.
My answer was that the couple’s attorney would have told them of other options. One of those options is to use the annual exclusion of $14,000 per recipient to gift tens if not hundreds of thousands of dollars out of their estate. If the couple chooses not to use available options, and instead lets the estate incur the taxes, there’s not much the heirs can do about it.
Yes, a good attorney would have informed them of this option. However, having been my parents’ caretaker and executor of their estates, I can attest to the fact that there are more than a few incompetent and unscrupulous attorneys around. Please don’t assume that we’ve been given proper, complete advice as to our options. My parents and I weren’t.