One option that is commonly overlooked is lifetime gifting. Did you know you can give up to a certain amount, called the annual gift tax exclusion amount, every year to as many people as you'd like? For 2018, this exclusion amount is $15,000, so you can give $15,000 to as many people as you'd like this year without owing any federal gift tax. If you're married, your spouse can do the same, so combined, the two of you can give up to $30,000 per person per year.
Lifetime gifting has several benefits. First, while I hate to talk myself out of work ;), lifetime gifting is as simple as writing a check so beyond working out a gifting strategy, you may not require legal assistance to make outright lifetime gifts. Second, lifetime giving allows you as the giver to not only decide exactly who gets what and apply any preconditions you may wish, but also to have the satisfaction of seeing the recipients enjoy your gifts. Also, depending on beneficiary ages, lifetime gifting may enable you to give the gift when it is most needed, for example, to help a grandchild go to college. And, the recipients get to express their appreciation for your generosity directly to you.
On the flip side, lifetime gifting also comes with a few risks. For most people, the biggest risk is that the money you give away today may be money you need for your own support in the future. Second, while you can revise a will or trust to change distribution plans as life circumstances change, lifetime gifting can't be undone in the same way, much as toothpaste can't be readily put back in the tube. For some people, these considerations may limit the practical value of the gift tax exclusion.
Amounts gifted up to the annual gift tax exclusion amount don't count toward your lifetime combined estate/gift tax exemption, which is another benefit. That said, even before the recent tax bill the exemption amounts were high enough not to be a planning consideration for many people, and now at $11.2 million individual/ $22.4 million couple, even fewer people will need to take that into account.
Many people may already be doing lifetime gifting in a small, informal way, such as small checks on birthdays, and for some clients, greater lifetime gifting isn't appropriate at this stage of life. For others, however, planned lifetime giving using the gift tax exclusion can be an easy, efficient, and satisfying way to distribute a significant amount of property.