How to give your home to your children and reduce taxes

Parents can give their homes to their children at a substantial tax savings by way of a trust know as a “qualified personal resident trust” (QPRT).  In creating a QPRT, parents put their home or vacation home in a trust to give it as a delayed gift (usually to their children) while retaining the right to live in the home for a number of years.  QPRTs are seen as ideal for keeping a home in a family for generations. 

Essentially, the way a QPRT works is that the value of the home is discounted to an amount reflecting the delay in time before someone else can live in the home.  The tax is applied to the discounted value.  Further, if the house appreciates in value over that time, all that appreciation will go to the children tax-free. [Read more…]

Planned Charitable Giving can take a Bite Out of Taxes

Planned charitable giving can play an important role in estate, gift and income tax planning.  Below are some of the more common methods of providing assets to charities.

 Outright gifts: This is the most common and popular form of charitable gift.  A will or revocable trust includes a provision leaving a fixed dollar amount or percentage of an overall estate to a particular charity.  You can modify the planned gift at any time.  [Read more…]

Families Can Prepay Tuition as a Way to Avoid Gift Taxes

The Internal Revenue Service recently ruled that individuals can prepay tuition of family members at private schools and colleges for a number of years as a way to cut their tax bills.

This wealth-transfer technique could be a wise move for people with large estates to deal with soaring education costs and trim their federal estate and gift taxes.  Prepaying tuition in large chunks reduces the value of an estate, which can save on future estate taxes. These payments don’t have to be reported to the IRS and are not subject to gift taxes.  The IRS case involved a taxpayer who prepaid private school tuition for all six of his grandchildren through the 12th grade. [Read more…]

Keeping your vacation home in the family

If you own a vacation home and you want it to remain in your family for the continued enjoyment by your children and future generations, you might want to consider some special planning to avoid unnecessary conflict.

For example, your estate plan could specifically cover how your vacation home is to be used and maintained following your death.  This could avoid tension among family members on how to upkeep the property and who should pay for property taxes, insurance and utility costs. [Read more…]

Blended Families can Squabble over Inheritance

More and more families have stepchildren as the result of second and third marriages, which has sparked an increase in contested wills around the country.

Tension can rise when a family member who holds a family together passes away, often a parent who has children with different spouses.  From an estate planning standpoint, perhaps the wisest course is to distribute assets separately.  That way, stepchildren are not financially intertwined with each other. [Read more…]

New Medicaid Eligibility Rules Could Require Changes to Estate plans

The rules on getting help from the federal government to pay for nursing home expenses have been tightened, making it harder for senior citizens to qualify for long term care payments.

With the average nursing home stay between two and three years at an average annual cost of $74,000, this could become a daunting financial burden for some seniors. 

The federal government has toughened the rules designed to prevent individuals from transferring assets to family members, usually children, as a way to qualify for Medicaid-funded nursing home care.  Gifts to children or charities may now be seen as suspect if a person later seeks Medicaid.  This could affect current estate plans. [Read more…]