By Keith Maderer

An invaluable part of any estate plan can be the strategic and systematic use of the annual gift tax exclusion. By properly planning your estate distribution strategy over a number of years, you can successfully lower, or even eliminate, estate shrinkage from administration, death taxes and probate costs.

A lifetime gifting program can help you to pre-administer your estate in a way that allows you to control how and when your assets are distributed. The following seven factors should be considered carefully as you look at your own gifting strategies and how you can obtain the biggest impact for your efforts. For this article we will illustrate a retired couple with three children, all of whom are married and each has two of their own children.

Seven Factors To Consider:

1. Both Retirees Alive: While both retirees are alive, they can each give $13,000 to each of their children (2011 gift tax exclusion amount) annually, as well as their children’s spouses and/or grandchildren. If we just use the children and their spouses, each parent could gift up to $26,000 for a combined $52,000 annually to each of their three children’s families. That’s up to $156,000 per year that they could gift from their estate to their children.

2. Establish Multiple Joint Accounts: What if you need money after it has been gifted away? First of all, a gift means that you give up all interest in the gift when it is received by your children. But if your children agree to open up joint accounts with each other and invest the gifts with the intention of leaving them alone until both retirees have passed away, just in case they are needed, this is an acceptable option.

3. Trusting Your Children: Of course this program requires our retirees to have complete trust in their children and their spouses. If you let them know you are making these lifetime gifts in an effort to pre-administer your estate, saving time and money and trust they will take care of you if you ever need assistance, this can be a great way to see the benefits of your efforts while you are alive.

4. Sixty Month Look Back: If something happens to one or both of our retirees and they need to be admitted into a nursing home, any gifts that were made within the prior five years or the sixty month look back period could be reverted back to the retirees, or the nursing home for payment of those costs. If our retirees still have enough assets and income to cover these nursing home costs, the previous gifts may not need to be reclaimed.

5. Death Of First Retiree: Upon the death of either of our retirees, the annual gifting amounts now will be cut in half. If our retirees haven’t started gifting yet, the maximum that can be gifted is now $26,000 to each family unit for a total of $78,000 annually. It is never too late to begin this program and the sooner a parent begins, the sooner the sixty month look back period will pass.

6. Life Estates: Another tool to consider if real property is part of a parent’s assets is to establish a life estate. This program allows the transfer of ownership of their real property to their children, but maintains their use of the property for the remainder of their life. This transaction is usually handled by a local real estate attorney and if our retirees would rather stay in their home instead of moving into an apartment or other living arrangement, it can be a great strategy.

7. Nursing Home Expenses: If nursing home care is needed and our retirees have gifted away all their assets over the years, it becomes very important to keep an accurate calendar of when the last gifts were made. If they were completed over sixty months earlier, they should not need to be considered, but if they were less than sixty months ago, you will need to review your options. It may be beneficial for the children to give back enough of the gifts to cover the monthly nursing home costs that would be needed to exceed the sixty month requirement. After that point, our retirees could qualify for public assistance. While their pension and social security income will be used to cover these costs, the remainder of their previously gifted assets should not.

Summary: A good lifetime gifting strategy can have many benefits if it is done properly. Make sure that you contact a good financial and estate adviser and begin planning your program today. It can be done in smaller amounts, over more years as long as the guidelines are followed. The peace of mind, time and money saved by using this program can be a great way to leave a wonderful legacy to your loved ones. To discover additional estate, financial and income tax strategies, check out my blog or download your FREE Wealth Expansion Kit by clicking here. The first step to creating wealth is knowing where you are and then charting a path that will enhance your financial strengths and correct your weaknesses.

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Keith Maderer is a financial expert and has been a investment and tax adviser in the Western New York area for over 30 years. He is the owner of SENIOR Financial and Tax Associates and the founder of the Maderer Foundation, a private scholarship program.

Keith is also the author of “How To Get Your College Education For Less” (Available on You can get your FREE Wealth Expansion Kit, or check out his blog by visiting Article Source: