We are often asked if giving away all of your possessions and assets prior to dying will help avoid the state and federal taxes on your estate. The answer is yes, and no. Timing is crucial if you plan to gift your assets to your loved ones before the time of your death.
Because there is no guarantee as to the length of our lives, giving away your assets to avoid estate taxes comes with risks. If you die within three years of giving away your assets, the value of those assets is taxable for federal estate tax purposes. If you live more than three years after giving away your assets, this can be a viable option to avoid paying heavy estate taxes.
A few things to keep in mind before you start giving away your assets:
- The value of the assets may be taxable under state and federal gift taxes
- Local taxes on the transfer of real property may be required
- Income taxes on gifts of funds from retirement accounts may be required
As with any estate planning activities, the safest bet is always seeking the counsel of an experienced Ohio estate planning attorney who will be able to help you avoid unexpected taxes on your estate.
