There is no doubt that COVID-19 has greatly impacted the lives of many people. For instance, much of the population has lost jobs or had their hours reduced due to the pandemic. Many people have been forced to get creative to provide for their families and maintain their standard of living.
In these times, planning for your estate may not seem like a priority. However, having a gifting strategy to take advantage of the COVID-19 economy could make a huge difference in your finances and life in the years to follow. An experienced attorney at our firm can offer more information on how to transfer property and assets to others in a way that avoids costly court hearings and the payment of taxes.
Federal Taxes Attach to the Transfer of Property
Federal and state governments can take a cut out of most transactions, including gifts to loved ones. For example, if a friend loses their job and needs a car to travel to interviews, it might make sense to give them an old vehicle. However, the IRS will levy a gift tax on this transfer, even though money never changed hands. This can place a burden on the person doing the good deed of giving their friend a car.
Luckily, proper estate planning can function as a way to avoid the payment of a gift tax. For example, if the person giving the car creates a Trust to facilitate the transfer of the property, that property is immune from taxation. This is because property that moves into a Trust no longer belongs to the original owner, so the law does not consider this as a gift. Talking with an attorney could help you better understand this method of estate planning to avoid taxation.
Giving Gifts to Charity Can Help to Lessen a Tax Burden
While the pandemic has had a harsh impact on many peoples’ finances, others have found new opportunities to grow their income. However, with this growth comes the increased burden of taxes. Effective estate planning can also reduce an individual’s tax burden through charitable donations.
A Charitable Lead Trust is a tool that allows you to place assets into a Trust that provides a steady stream of income to a charity. Those assets are immune from taxation and can even provide a tax deduction. In this way, you can also benefit from your generosity to a charity.
Ask an Estate Planning Lawyer about Gifting Strategies During COVID-19
COVID-19 has caused major disruptions in many people’s finances. Some have lost a significant portion of their income and must rely on the help of others to make ends meet. Here, having an estate plan can help friends to avoid paying taxes on gifts.
For those who have seen an increase in income during the pandemic, providing funds to a charity through a Trust can help reduce income taxes and make those assets safe from taxation. Reach out to a lawyer at our firm today to learn more about gifting strategies during the COVID-19 pandemic.