Should You Use Up Your Lifetime Exemption Early?

If you suspect, like some do, that public policy will alter the limits on gift and estate taxes, then it is important to think about different strategies you can use to accomplish your estate planning goals. A consultation with a dedicated estate planning lawyer can help you to identify which of these strategies are most appropriate for you.

If you currently own an asset that you believe will appreciate and you want to make the most of today’s exclusions because you are concerned that it’s going to drop lower, the IRS has recently provided guidance that indicates that you will not be penalized for using that exemption while you are still alive.

If you die when the exemption is lower and have held on to an appreciated asset, more of the estate will be taxable and, therefore, your estate tax will be higher. There is a tradeoff, however, that you need to be aware of and one that you should discuss with your estate planning lawyer.

You will benefit because there is less in the estate that can be taxed when you pass away but the cost basis of any gifted assets will carry over to the person receiving the gift. You are better off holding on to the asset until you pass away to allow your heirs to benefit from the step up in basis if you were going to end up being below the current estate tax exemption in any scenario. For more information, set up a time to speak with a Pasadena area estate lawyer.

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