One of the main goals of estate planning is simply to decide what happens to your financial assets after you pass away. You want to make sure that your heirs and other beneficiaries know who is supposed to get which assets.
However, you have the option to give financial gifts to people and non-profit organizations while you’re still around. What are some of the reasons that people would choose to do this instead of just putting those gifts into the estate plan itself?
Getting below a tax threshold
There is no estate tax at the state level in North Dakota, but there is a federal estate tax. Some individuals find that it will be financially beneficial to get down below a certain threshold so that taxes aren’t assessed on their estate, so they will give away assets until they do.
It can make things go more smoothly
In some ways, giving people assets prior to passing away ensures that the process goes much more smoothly than if you included them in your estate plan. This lowers the odds of an estate dispute, and it gives you a chance to talk with all of your heirs about how you would like this money to be used or why you’ve made the decisions that you’ve made.
If you give away your money by paying for certain costs that your heirs have, those payments will not be taxable, despite being a gift. Two common exclusions are for medical bills and tuition payments. This allows you to give away even more money before running into tax thresholds.
Estate planning can certainly be complicated, and this is just one part of it to consider. Make sure you understand your legal options.