Year End Estate Planning

by | November 10, 2009

Our guest blog post this week is by Kanoa Ostrem, a Seattle-based estate planning attorney. Mr. Ostrem’s practice focuses on counseling and assisting individuals and families with their estate planning needs in a cost-effective and efficient manner. For more information, visit his website at

The end of the year presents just one critical estate planning deadline. December 31st is the last day to utilize your $13,000 “annual exclusion” gifts in favor of your loved ones. Each year you may make $13,000 gifts to as many individuals as you wish without gift tax consequence. Importantly, you are not even required to report the gifts as long as they do not exceed $13,000 in any given year for any beneficiary. If you give more than $13,000 to any beneficiary in a year, then you are required to file a gift tax return. You would then be utilizing a portion of your $1,000,000 gift tax exemption or even triggering a 45% gift tax!
If you don’t use the $13,000 annual exclusion in a year, it is essentially wasted since you don’t get to carry it over into the next year.

A good strategy is to set up a “Family Gifting Trust” and then to write a check to the trust for each trust beneficiary. For example, if you have 3 children and 7 grandchildren, you may gift $130,000 to the trust and use the annual $13,000 exclusion for all 10 beneficiaries. If you are married, your spouse may make the same gift, thus resulting in a total of $260,000 worth of gifts. The Trustee may accumulate these funds and need not make current (or equal) distributions to the the trust beneficiaries. Importantly, you may gift shares in real estate or a family entity such as a Limited Liability Company or Family Limited Partnership to minimize the impact on your cash reserves. Over time, this is a very simple yet powerful way to move a family investment to the next generations.