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To Gift or Not to Gift...

To Gift or Not to Gift...

The good news is that you can annually gift up to $13,000 to as many individuals you choose and it will forever escape all Federal estate tax. The bad news is this is an often-misunderstood concept that can influence people to part with substantial amounts of their nest eggs unnecessarily.  

I often overhear a random conversation where someone of an advanced age is telling another that they are giving $13,000 to a relative because it is “tax-free.” I shudder to think how they became acquainted with the idea that they must part with their liquid assets or Uncle Sam will “get every last penny!” While it is true that Federal estate taxes can be a tremendous burden on business owners and large estates, it is also a fact that a very small percentage of our population will ever owe Federal estate tax. As it stands today through the end of 2012, one can exclude up to $5 million of assets from Federal estate taxes at death ($10 million per married couple). Although the laws may change (if nothing is done, the exclusion will revert to $1 million per person in 2013), most people will never approach the assets required to be concerned about owing estate tax. If you expect to have in excess of $5 million in assets (or $1 million if you believe the laws will change in 2013), gifting $13,000 per year to various family members or friends can provide you with a simple, low-cost way of reducing your taxable estate as well as seeing your loved ones enjoy these gifts during your lifetime.

Here’s how it works: Let’s say you have $6 million and want to reduce your estate below the $5 million exemption. If you have five children and ten grandchildren, you could gift each one of them $13,000 or $195,000 per year (15x$13,000). In approximately five years, you would have gifted roughly $1 million and accomplished your goal of getting your estate below the $5 million exemption without paying for sophisticated planning strategies. You could have doubled this amount to $390,000 per year by gifting to their spouses as well which would have allowed you to reach your goal in half the time. The gifted assets are removed from your estate forever, and the beneficiary of the gift receives them free of any tax consequence. Amounts given annually to any individual beyond $13,000 must be reported to the IRS.

For example, if you gave an individual $100,000, $13,000 would not need to be reported, but the remaining $87,000 would be and would begin to reduce the individual’s $5 million lifetime allowance ($1 million after 2012) that is free from gift tax. In this example, the $87,000 reported to the IRS would be taxable to the giver at date of death, but any appreciation would remain estate tax free. It is important to familiarize yourself with these rules as gifting remains one of the most misunderstood areas in personal finance.

So, the next time you or a loved one are approached with the idea of giving away your money in order to protect your assets from Uncle Sam, make sure you are armed with the basic information you need in order to fully understand if gifting is appropriate, given your financial situation. It is always a good idea to consult your attorney or trusted financial adviser when devising a gifting or any other estate tax minimization strategy.

Shayne Nagy, CTFA
Senior Vice President
Trust and Investments 


Contact a Representative Today

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    Tuesday, April 15, 2014

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Personal Banking Security Measures for the 21st Century

clientuploads/21st-Century-Securitysquare180.pngMany of us are constantly connected to the online world these days. This means that the potential is there for our computers and personal information to be compromised which greatly increases the risk of ID theft and financial fraud to occur. However, by taking some basic precautions you can significantly reduce the risk of your computing environment being compromised. Following these simple guidelines should help your computing environment become more secure:

Keep your computer and software up-to-date

Keep your computers and network equipment secured with the latest software updates and enable automatic updates whenever possible.  This includes updates to third party applications such as Java and Adobe Products.  

Use hard drive encryption

In the event your machine is lost or stolen, drive encryption can prevent others from accessing the data on your hard drive.  The purpose is to encrypt or scramble your data on your machine so that it can only be read with your encryption key.Many operating systems offer drive encryption.  Microsoft offers Bitlocker and Apple has FileVault. There are also other third party encryption offerings.   

Enable your firewall

Think of the firewall to your computer as the fence around your property.  If there were multiple holes cut in the fence, it wouldn’t be very useful at keeping people out.  Firewalls are typically enabled by default on Windows machines, but double check to make sure it’s on.  Here are instructions to do so if you are using Windows 7. Only allow necessary applications inbound access through your firewall. The same principles apply to your network firewall. 

Configure your screensaver

Set an auto-locking screensaver so your account gets locked out after a few minutes.  This is useful if you forget to lock your machine when are away from it. On Windows machines this can usually be done by pressing the “Windows Key” and the “L” button simultaneously.

Make your passwords stronger

The longer and more complex the password, the better.  At least 16 characters with a combination of upper and lowecase letters, numbers, and special characters is a best practice.

Configure your router

Use the strongest wireless security available (currently WPA2-CCMP) with a long and complex password for your wireless network. Disable WPS on your wireless router for greater security.   

 


Think that some secure banking information
of yours has been compromised?

If you suspect that your personal financial information has been compromised, call MutualBank Customer Support at 800-382-8031.


 

Monday, April 7, 2014

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To Gift or Not to Gift...

To Gift or Not to Gift...

The good news is that you can annually gift up to $13,000 to as many individuals you choose and it will forever escape all Federal estate tax. The bad news is this is an often-misunderstood concept that can influence people to part with substantial amounts of their nest eggs unnecessarily.  

I often overhear a random conversation where someone of an advanced age is telling another that they are giving $13,000 to a relative because it is “tax-free.” I shudder to think how they became acquainted with the idea that they must part with their liquid assets or Uncle Sam will “get every last penny!” While it is true that Federal estate taxes can be a tremendous burden on business owners and large estates, it is also a fact that a very small percentage of our population will ever owe Federal estate tax. As it stands today through the end of 2012, one can exclude up to $5 million of assets from Federal estate taxes at death ($10 million per married couple). Although the laws may change (if nothing is done, the exclusion will revert to $1 million per person in 2013), most people will never approach the assets required to be concerned about owing estate tax. If you expect to have in excess of $5 million in assets (or $1 million if you believe the laws will change in 2013), gifting $13,000 per year to various family members or friends can provide you with a simple, low-cost way of reducing your taxable estate as well as seeing your loved ones enjoy these gifts during your lifetime.

Here’s how it works: Let’s say you have $6 million and want to reduce your estate below the $5 million exemption. If you have five children and ten grandchildren, you could gift each one of them $13,000 or $195,000 per year (15x$13,000). In approximately five years, you would have gifted roughly $1 million and accomplished your goal of getting your estate below the $5 million exemption without paying for sophisticated planning strategies. You could have doubled this amount to $390,000 per year by gifting to their spouses as well which would have allowed you to reach your goal in half the time. The gifted assets are removed from your estate forever, and the beneficiary of the gift receives them free of any tax consequence. Amounts given annually to any individual beyond $13,000 must be reported to the IRS.

For example, if you gave an individual $100,000, $13,000 would not need to be reported, but the remaining $87,000 would be and would begin to reduce the individual’s $5 million lifetime allowance ($1 million after 2012) that is free from gift tax. In this example, the $87,000 reported to the IRS would be taxable to the giver at date of death, but any appreciation would remain estate tax free. It is important to familiarize yourself with these rules as gifting remains one of the most misunderstood areas in personal finance.

So, the next time you or a loved one are approached with the idea of giving away your money in order to protect your assets from Uncle Sam, make sure you are armed with the basic information you need in order to fully understand if gifting is appropriate, given your financial situation. It is always a good idea to consult your attorney or trusted financial adviser when devising a gifting or any other estate tax minimization strategy.

Shayne Nagy, CTFA
Senior Vice President
Trust and Investments 


Contact a Representative Today

Back to Education Resources

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