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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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  • MutualFirst Financial, Inc. Declares 20% Increase in Dividend

    Muncie, Indiana – MutualFirst Financial, Inc....

    Monday, February 23, 2015

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Proactive Steps to Take in Light of Anthem Data Breach

Chances are you are a person who has Anthem insurance coverage or you know someone who does. As a result, either you or your friend has a reason to be concerned.

A typical data breach includes a compromise of debit card numbers or partial personal identifying information. This kind of breach, though inconvenient, can typically be ‘fixed’. An initial investigation indicates that the Anthem breach includes a compromise of name, birthday and/or social security number. This kind of information is all one needs to steal someone’s identity.

According to Anthem this particular breach could affect up to 80 million people. Instead of trying to ignore this has happened or just being upset, it’s now time for you to be educated and try to protect yourself as best as you can. We have some tips that will help you accomplish that.


1. Review Your Statements


First, take a moment each month to view your eStatement or monthly statement. You can monitor your accounts throughout the month with Online Banking and the MutualBank App. Monitoring your accounts will give you the quickest opportunity to see if your accounts have been compromised. If you notice any transactions that are unfamiliar or questionable, please get in touch with your MutualBanker. Call us at 800-382-8031.


2. Be Cautious with Any Anthem Emails You Receive


Next, if you receive an email stating it is from Anthem, be cautious. Anthem’s website warns customers not to reply with information, click any links or open any attachments within the email. Anthem is not calling their customers and will not ask for information. Never give your credit card information, social security number, or other sensitive information to someone via email or over the phone.


3. Consider Freezing Your Credit


If you are a resident in Indiana, the Attorney General’s office website (http://www.in.gov/attorneygeneral/2853.htm) is offering and encouraging you to sign up for a free credit freeze with each of the three credit bureaus. A credit freeze places a hold on your credit where a new line of credit could not be obtained without you unfreezing your credit. This doesn’t affect already open credit lines like an existing credit card, yet helps to protect you against someone opening new lines of credit in your name.


4. Keep in the Know


Finally, try to keep in the loop on the Anthem Breach. The best source for current information about this breach can be found at Anthem’s Frequently Asked Questions. (http://www.anthemfacts.com/faq)

MutualBank is here to help inform you of ways to help protect against identity theft. Thank you for trusting us.

Sunday, February 15, 2015

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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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