You have a lifetime exemption for estate tax calculation; a $5.25 million exemption. For the rest of this year, every American can transfer up to $5.25 million free of federal gift, estate and generation-skipping transfer tax. (A married couple can transfer up to $10.50 million.) If Congress does not change the current law, the federal estate tax exemption in 2014 will be just $1 million. You do not have to die in 2013 to use this exemption; you can use it to make gifts now, while you are living. You do not have to completely give away your assets; you can make the transfers in ways that will let you keep control and even keep the income your assets are generating.
Gifting can make solid sense. Under current federal law you can give up to $14,000 to as many people as you wish each year. This is a great way to reduce the size of your estate (and potentially save estate taxes) over time. For example, if you give $14,000 per year to your two children and three grandchildren, you would remove $70,000 from your estate in just one year and $350,000 in five years. (You can double these amounts if you are married.) Charitable gifts are unlimited.
Review and update beneficiary designations. Beneficiary review should include life insurance policies, 401 (k), pension plans and IRA’s. In larger estates, the incident of ownership of life insurance should be examined.
Review and update your existing estate plan. Personal and financial circumstances will change throughout your lifetime, and your plan needs to change with them. Revisions should be made any time there have been changes in your family. Review your will and any trust agreement which can affect how and when your heirs receive funds.
Remember; always consult your licensed tax preparer before making any serious or permanent decisions. Tax law and interpretation of tax law can be highly detailed, make sure you fully understand your options before making a final decision. Proper legal and accounting advice is important, get it!.