Hopefully, you are thinking about making end of life arrangements way before the need arises. If so, congratulations! You are a forward thinker and prepared planner. Looking at all you can do to make the transition easier for your loved ones, you may be wondering about asset transfer. Ensuring a transfer of assets to your minor children is a great way of protecting your estate and avoiding unnecessary tax liabilities. Before you make any changes, it is important to know the basics.
If you are considering transferring assets to a minor child, you may want to explore custodianship for the minor. This is essentially a third party that would hold the property until the minor child is of age and can be granted ownership of the property. Not only does this help protect your assets until your child is old enough to take control of it, but it also takes that portion of the estate out of the amount that may be subject to federal tax liability.
A trust for your minor child is another great way to transfer assets. Keep in mind that in order for the trust to avoid tax liabilities there are IRS rules that must be followed to secure the savings. Essentially the trust must be for the benefit of the minor, which is classified as an individual that has not yet reached the age of 21.
You may also choose to take advantage of the gift tax exclusion offered by the IRS. This exclusion basically states that if you are married and both you and your spouse want to gift amounts to your minor children you may do so. Either $10,000 or $20,000 from the estate may be gifted each year to a single individual without being subject to federal gift tax. If you are considering transferring assets to a minor child or would like to take advantage of the gift tax exclusion, speaking to a trusted estate planning attorney may help.