In This Edition:
- Greetings from Myatt & Bell President, Justin Martin
- Estate & Gift Tax Planning
- Get to Know Our Team
- Recipe Spotlight
- Complimentary Estate Planning Webinar
Dear M&B Family,
This issue explains how gifting during your lifetime can be an effective estate planning strategy that offers multiple benefits.
Gifting can help you reduce estate taxes while providing your beneficiaries with immediate use and enjoyment of transferred assets. Use of the annual gift tax exclusion is one way to do so. For 2022, each person may gift $16,000 to as many people as they wish. For example, a married couple may gift $32,000 from a joint marital or joint trust account to each child, or in some scenarios, to each child’s irrevocable trust. Additional gifts could be made to grandchildren, if appropriate.
There can also be many pitfalls in gifting, so please let us know whether you need help with your gifts! In the meantime, we hope you enjoy the enclosed article about the various lifetime gifting opportunities that are available.
Justin R. Martin
President, Myatt & Bell, P.C.
Estate & Gift Tax Planning
By Andrew D. Ginis, Attorney and LL.M. in Taxation
Does it make sense to make gifts prior to death?
For many of us, estate planning is not about taxes. It is about how we want our assets distributed. But thoughtful estate and gift planning can help preserve your wealth and pass it on to your beneficiaries in a way that may lower your tax obligations.
Does lifetime gifting make sense?
If you believe your estate might owe estate tax, gifting assets throughout your life, rather than waiting until death, can be a powerful way to reduce the amount of taxes ultimately paid by your estate. That is because both the present value and any potential future growth of the gifted assets are removed from your taxable estate.
Even if taxes are not your primary concern, giving a smaller amount when your beneficiaries need it, and while you may witness the benefit, may be more meaningful for everyone.
What matters is doing what works best for you and your family.
What estate taxes apply?
The IRS allows a lifetime tax exemption on gifts and estates, up to a certain limit, which is typically adjusted yearly to keep pace with inflation.
Since the Tax Cuts and Jobs Act of 2017, the federal estate tax and lifetime gift tax exemptions have reached historic highs.
Today, the value of assets at death in excess of $12.06M for individuals ($24.12M for married couples) is taxed at a rate of 40%. Because the same exemption amounts are tied to lifetime gifts, this means that a single individual could gift $12.06M tax free, and a married couple could gift a combined $24.12M without paying any gift tax.
These are the highest exemptions in the history of the estate and gift tax, but they expire in 2025, when the exemption limit is set to automatically fall back to the previous level (about $6M if adjusted for inflation).
If today’s exemption disappears after 2025, how can you take advantage of the historically high exemption while it’s still available?
To leverage the historically high gift tax exemption you must gift more than the amount that the exemption is eventually lowered to. For example, if a gift of $7M is made under current law before the exemption is reduced to $6M, then the donor would have taken advantage of $1M of the opportunity (the amount of the gift in excess of the reduced exemption). Any amount under $6M (or whatever amount the exemption is potentially lowered further to) would fail to take advantage of the current high exemption amount. This means that the window of opportunity is open now and for individuals and couples with larger estates.
Oregon State Taxation
While some gifts and tax paid on federal gifts made within three years of death are included in an individual’s federal taxable estate, Oregon has no such rule. In fact, Oregon has no gift tax at all.
However, Oregon does have a $1M estate tax exemption and assets held at death in excess of this limit are taxed at a rate of 10-16%. This means that every lifetime gift, no matter the size, can save eventual estate tax in Oregon.
As a result, gifting can be a powerful estate planning strategy to reduce the size of your estate and the amount that is eventually subject to Oregon estate tax. For example, consider Steve and Grace, who are both in their early 70’s and have two grown children, each with children of their own. At a combined $10M, the couple’s estate today is less than the current federal exemption of $24.12M for a married couple and less than the presumed reduced exemption of $12M. However, Steve and Grace don’t even come close to spending the income and growth from their assets. Assuming a typical mix of real estate, retirement accounts, and investment accounts or business interests, asset values are likely to continue growing and their estate could be $20M or more in 10-15 years.
Gifting this year would not only remove the value of the gifts from their estate but also the future growth on these assets. By gifting, Steve and Grace could reduce or avoid federal estate tax and reduce Oregon estate tax, a potential savings of 40% at the federal level and 10 – 16% for Oregon.
Myatt & Bell, P.C. has decades of experience assisting clients in creating estate plans.
Our team of attorneys will answer your estate planning questions and identify some techniques that may be available to lower your tax obligations, including two common tools to control and access assets that have already been gifted (IDGT & SLAT).
Give us a call. We are ready to help.
Laura Watts, Paralegal
What are you currently reading? “The 1619 Project” by Nikole Hannah-Jones.
What is your favorite food? Ramen.
What do you do just for fun? With three children, I don’t have a lot of spare time! But when I do have spare time, I enjoy watching a show or listening to a book.
Can you share a fun fact about you? Sure! I graduated from Willamette University College of Law and practiced law as an attorney in Colorado. A couple years later, my family moved to Tucson, Arizona, so my husband could begin a PhD program. Planning that our time in Arizona would be limited, I worked as a paralegal for a law firm specializing in elder law, probate administration, and estate planning. I grew to love this area of the law! After many years of moving, my family has decided to make Oregon our permanent home. I look forward to a long career with Myatt & Bell and plan to take the Oregon State Bar soon.
Laura’s Pumpkin Cheesecake
- 1 ½ cups graham cracker crumbs
- 1/3 cup butter or margarine, melted
- 1/4 cup granulated sugar
- 3 packages (8 ounces each) cream cheese, softened
- 1 cup granulated sugar
- 1/4 cup packed brown sugar
- 1 ¾ cups ( 15-ounce can) pumpkin
- 2 eggs
- 2/3 cup evaporated milk
- 2 tablespoons cornstarch
- 1 ¼ teaspoons ground cinnamon
- ½ teaspoon ground nutmeg
- 2 cups ( 16-ounce carton) sour cream, at room temperature
- 1/4 to 1/3 cup granulated sugar
- 1 teaspoon vanilla extract
- Whole strawberries, sliced and fanned (optional)
Combine graham cracker crumbs, butter and granulated sugar in medium bowl. Press onto bottom and 1 inch up side of 9-inch springform pan. Bake in preheated 350°F oven for 6 to 8 minutes. Do not allow to brown. Cool on wire rack.
Beat cream cheese, granulated sugar and brown sugar in large mixer bowl until fluffy. Beat in pumpkin, eggs and evaporated milk. Add cornstarch, cinnamon and nutmeg; beat well. Pour into crust.
Bake at 350°F for 55 to 60 minutes or until edge is set but center still moves slightly.
Combine sour cream, granulated sugar and vanilla extract in small bowl. Spread over surface of warm cheesecake. Bake at 350°F for 8 minutes more. Cool in pan on wire rack. Chill for several hours or overnight; remove side of pan. Garnish with strawberries.
Makes 16 servings.
Estate Planning & Peace of Mind
Have you found yourself making excuses for why not to get your estate in order? Maybe you’re convinced that you really don’t need estate planning. If you have assets and loved ones, you need an estate plan. Having an estate plan that is right for you ensures your loved ones are taken care of and that the transition is as easy as possible.
Attend one of our complimentary estate planning webinars and see for yourself. Having your estate plan prepared and understanding the why’s behind the importance of estate planning can bring you the peace of mind you have been needing. Join us at our next Estate Planning Informational Webinar by clicking here.
From Our Clients
“We always get great service, all of our questions answered. The staff are polite courteous attentive and pleasant. Most importantly, their fees are very reasonable and we never go away feeling like we got gouged. We always recommend this firm to friends when they are seeking good counsel and estate planning needs.” – Linda D.
“We have never been anything other than delighted with the professionalism, customer service, expertise and engaging culture of this estate planning legal practice. Check out their website for a calendar of regularly presented online introductions to estate planning basics. I’ve participated in these webinar a couple of times since I understood more every time I listened in.” – Sandy N.
Families choose Myatt & Bell to design their estate plans with honest optimism and meticulous attention to detail.
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