Serving Michigan families from our offices located in Livingston County, Brighton, Michigan.
Our firm is a comprehensive Estate Planning & Probate Law Firm
Contact our Offices at
Law Offices of
Dugas & Associates
Suzanne M. Dugas, J.D., LLM.
810 W. Grand River
Brighton, Michigan 48116
Call us at:
Michigan Estate Planning & Probate Firm
Estate Planning - It's not rocket science continued......
Your annual exclusion does not count against the $5 Million lifetime exemption, and no deduction is taken for your gift. The gift may also go to a trust rather than the individual.
As with most gifts the gift must be completed. If Uncle George is on his death bed, he must transfer his gifts prior to his death to take full advantage of the exemption. If Uncle George wants you and your family of four to have his 1933 Packard, valued at
$65,000.00, the family should take possession of this vehicle and title prior to Uncle George's death. Documentation of these completed transactions is crucial to surviving an IRS challenge.
Another wonderful feature of this gift tax exemption is the 529 college savings plan. An individual can bunch up 5 years worth of exemptions, or $65,000.00 per giver, as a contribution to a college savings plan. However, no other gifts to this individual can take place for this 5 year period.
It is important to note when discussing this topic that if the giver has a cost basis in the gift (stocks,real property, etc) this carries over to the recipient of the gift. For example Uncle George gifts $13,000.00 in stocks he purchased for $4,000.00. The recipient of this stock takes Uncle George's $4,000.00 basis. Once recipient sells these stocks his capital gains are measured from the $4,000.00 basis.
Family Limited Partnership continued .......
The liability for partnership debt of this younger generation is limited to their interest in the partnership. Important to note is the fact that the partnership assets are protected from the creditors of the partners. For these and other tax reasons family partnership is a great estate planning alternative to an irrevocable trust.
Transferring, let say the family cottage, by Mom & Dad, is a non taxable event. In exchange for the transfer they receive "partnership units". Mom and Dad then bring in the younger generation to the Family Partnership by making gifts of these limited partnership units.
There is no exercise of management control over the Family Partnership by this younger generation and a limitation is placed in the Partnership Agreement regarding limits on transferability of the partnership units.
This tool of the estate planner enables the older generation to gift over the largest portion of the Partnership to the younger generation while retaining controlling interest as the general partners and reducing their taxable estate.
Important is the reduced value of each partnership unit based on younger generations limited control and management control. Mom & Dad's estate may qualify for a "valuation discount" enabling a transfer of more assets by leveraging the annual gift tax exclusion and unified credit , thus reducing gift and estate tax liability.
A well drafted estate plan is the key to your future. The will and the trust instruments protect you during your lifetime enabling your successor trustee to maintain your assets and wealth during a period of lifetime incapacity as well as at the time of your death. The Durable Power of Attorney for Health insures your health directives are heard if you cannot speak for yourself in a time of serious illness. The Durable Power of Attorney can provide lifetime protection over financial affairs and resources during a lifetime disability.
An estate planning attorney can give you reassurance that your estate planning needs and goals can be met with all the available estate planning tools such as a will, trust, family limited partnership, powers of attorney and health directives. They can also assist with strategies in dealing with unforeseen events regarding future generations.
The first, is a tax issue. Was this a gift to the children at the time of transfer? Was there a gift tax return filed? What is the basis for the children? Do they take the parents basis causing capital gain tax on sale? These are very serious issue which are usually never addressed and only discovered after the parent has passed away and it is to late to reverse this recorded transaction.
Joint Ownership - At what Cost? continued ......
The second is your liability exposure. Once you place your children's names on your property your children's creditors can attach your property, you could become financially responsible on a money judgment against your children and you are exposed to their divorce action, and other legal entanglements.
The third, and less obvious issue is the loss of control during your lifetime. If you should decide to sell your property and move you must get the approval of your joint tenants. Their signature is required by law to sell this property. Our firm has, over the years, many clients who have drafted a deed and placed their children's names on their home. They now requested the deed be changed back into their names so they could sell their property. Simply stated, the courts will not require the children to sign the deed back to you should they, for whatever reason, refuse to sign the deed.