When you leave behind inheritances to your loved ones the point is to provide for them once you are gone and no longer able to respond to their needs. This is all well and good and as it should be, but there is no more comforting feeling than knowing that your family members are fully capable of taking care of themselves. With this in mind you may want to consider taking advantage of a gift tax exemption that can lead your younger heirs toward a path of academic achievement.
Should you inventory your assets and find that your estate is subject to the federal estate tax you are going to want to take steps to mitigate your estate tax exposure. Reducing the taxable value of your assets while transferring resources to those who would otherwise be inheriting them is a typical strategy. One way that this can be done is by giving tax-free gifts.
It should be noted that there is a gift tax in place that is unified with the estate tax. The two carry the same rate, which is 35% at the present time. Though there is a lifetime $5 million exclusion as of this writing, if you give gifts using this exclusion your available estate tax exclusion will be reduced by the amount of the gifts since the taxes are unified.
In spite of this there are some other exemptions that don’t impact the unified exclusion. One of these allows you to pay the college tuition (or any school tuition) of an unlimited number of students equaling any sum of money as a gift free of the gift tax. So if you utilize this exemption you’re reducing the value of your estate for tax purposes while giving some of your loved ones the gift of opportunity, which in a very real sense may be the greatest gift of all.