What Are Some Advantages of Making Lifetime Gifts? – Annapolis and Towson Estate Planning

There are several non-tax advantages of making lifetime gifts. One is that you’re able to see the recipient or “donee” enjoy your gift. It might give you satisfaction to help your children achieve financial independence or have fewer financial concerns.

WMUR’s recent article, Money Matters: Lifetime non-charitable giving,” explains that lifetime giving means you dictate who gets your property. Remember, if you die without a will, the intestacy laws of the state will dictate who gets what. With a will, you can decide how you want your property distributed after your death. However, it’s true that even with a will, you won’t really know how the property is distributed because a beneficiary could disclaim an inheritance. With lifetime giving, you have more control over how your assets are distributed.

At your death, your property may go through probate. Lifetime giving will help reduce probate and administration costs, since lifetime gifts are typically not included in your probate estate at death.  Unlike probate, lifetime gifts are private.

Let’s discuss some of the tax advantages. First, a properly structured gifting program can save income and estate taxes. A gift isn’t taxable income to the donee, but any income earned by the gift property or capital gain subsequent to the gift usually is taxable. The donor must pay state and/or federal transfer taxes on the gift. There may be state gift tax, state generation-skipping transfer tax, federal gift and estate taxes, as well as federal generation-skipping transfer (GST) tax.

A big reason for lifetime giving is to remove appreciating assets from your estate (i.e., one that’s expected to increase in value over time). If you give the asset away, any future appreciation in value is removed from your estate. The taxes today may be significantly less than what they would be in the future after the asset’s value has increased. Note that lifetime giving results in the carryover of your basis in the property to the donee. If the asset is left to the donee at your death, it will usually receive a step-up in value to a new basis (usually the fair market value at the date of your death). Therefore, if the donee plans to sell the asset, she may have a smaller gain by inheriting it at your death, rather than as a gift during your life.

You can also give by paying tuition to an education institution or medical expenses to a medical care provider directly on behalf of the donee. These transfers are exempt from any federal gift and estate tax.

Remember that the federal annual gift tax exclusion lets you to give $15,000 (for the 2019 year) per donee to an unlimited number of donees without any federal gift and estate tax or federal GST tax (it applies only to gifts of present interest).

Prior to making a gift, discuss your strategy with an estate planning attorney to be sure that it matches your estate plan goals.

Reference: WMUR (April 18, 2019) “Money Matters: Lifetime non-charitable giving”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Passing the Family Business to the Next Generation – Annapolis and Towson Estate Planning

Creating a succession plan for a family business needs awareness of more than just spreadsheets, says the article “How to plan for a smooth transition of your family business” from North Bay Business Journal.

Family owned vineyards or farms face challenges, when one or two children have chosen to work in the business. Sometimes there is preferential treatment, either with economics or voting and control of the business.

Estate planning attorneys can serve as sounding boards in creating a balance between what will be best for the business and what will work to maintain peace and cohesiveness in the family. With experience in guiding families through this process, they are able to provide an unbiased view and can be helpful, when hard decisions need to be made.

Another part of the plan is having the family and the estate planning attorney meet with other professionals, such as a wealth manager and CPAs. This is especially helpful when the owners are reluctant to talk about what is happening in the business with their children, before clarifying their own thoughts about the business.

Taking time to step back and gain some perspective before holding a family meeting where decisions are made will give the owners more clarity.

A succession plan often starts a business plan. Once there is a plan for the future of the business, it’s an easier transition to financial and estate planning. Taking these steps can help the business be successful. Any business will run better when the numbers and projections for future growth are in place. Banks and other lenders look favorably on a company that has its financial reports in place.

This also permits tax planning to be done properly. In some cases, transferring a business or other asset while the owner is still living can be beneficial in the long run, even with today’s higher federal estate tax exemptions.

Lifetime gifts can be a way to reduce estate taxes because making a gift today, before there has been substantial appreciation, is one way to leverage the gift and estate tax exemption. Let’s say an asset is valued at $1 million, but at the time of your death it may be valued at $8 million. By giving it today, you can use less of your lifetime exemption.

To transfer the business to one or more children and give them an opportunity to succeed on their own, through their own efforts, consider bringing them in as a responsible manager with some ownership.

A gradual approach in transferring control of a business is a wise move, say experts. One family put their real estate holdings into an entity that gave some ownership interests to each of their children, but one of them was appointed as the manager.

Reference: North Bay Business Journal (April 9, 2019) “How to plan for a smooth transition of your family business”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

For Immediate Release

Contact: Jane Frankel Sims

410-828-7775

Contact: Frank Campbell

410-263-1667

Sims & Campbell Estates and Trusts

Frankel Sims Law and Holden & Campbell
Merge to Form Sims & Campbell

Firm will offer comprehensive Trusts & Estates services through offices in Towson and Annapolis

TOWSON, Md. (April 26,2019)  Frankel Sims Law and Holden & Campbell have jointly announced the merger of their firms to create a boutique Trusts & Estates law firm providing comprehensive services in the fields of Estate Planning, Estate Administration, Trust Administration and Charitable Giving. The combined firm will be named Sims & Campbell and have offices in Towson, Md. and Annapolis, Md.  Jane Frankel Sims and Frank Campbell will lead and hold equal ownership stakes in the firm.

Sims & Campbell will have 9 attorneys and 15 legal professionals that handle every facet of estate and wealth transfer planning, including wills, revocable living trusts, irrevocable trusts, estate and gift tax advice, and charitable giving strategies.  The firm will focus solely on Trusts & Estates but will serve a wide range of clients, from young families with modest resources to ultra-high net worth individuals.  This allows clients to remain with the firm as their level of wealth and the complexity of related estate and tax implications change over time. 

“By joining forces, we have expanded our footprint to conveniently serve clients in Maryland, D.C. and Virginia” said Jane Frankel Sims.  We are seeing some of the greatest wealth transfer in our country’s history, and we want to continue to be on the leading edge of helping our clients maintain and enhance their family’s wealth.  In addition, we aim to serve our clients for years to come, and the new firm structure will allow Sims & Campbell to thrive even after Frank and I have retired.”    

“Jane and I have always admired each other’s firms and recognized the need to provide even greater depth and breadth of focused expertise to help families amass and protect their wealth from generation to generation,” said Frank Campbell.  “Now we have even greater capabilities to make a real difference for our clients.” 

The Sims & Campbell Towson office is located at 500 York Road, on the corner of York Road and Pennsylvania Avenue in the heart of Towson.  The Annapolis office is currently located at 716 Melvin Avenue, and is moving to 181 Truman Parkway in August, 2019.  For more information, visit www.simscampbell.law.