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Florida College Savings: A terrific way to give

For Florida seniors looking to lower their taxable estate, annual gifts may be just the ticket. Many seniors wonder about this because not too long ago estate taxes were a real threat to upper middle class earnings. This is not as true these days, as the maximum exclusion limits risen significantly. Nevertheless, there are things high-income families can do. First, it is important to look at how estate taxes and gift taxes have changed just since 2000.

Estate Taxes Are No Longer The Threat They Once Were

For seniors who are worried about losing half their estate to taxes, the good news is that the exclusion amount has skyrocketed. Just 15 years ago in 2000, the IRS only allowed a $675,000 exclusion. This means anyone who died with over $675,000 had to pay the maximum tax rate on the excess amount. At that time, the maximum rate was a massive 55 percent. So the fear is warranted. However, today, the maximum tax rate is only 40 percent and the exclusion amount is $5,430,000. So unless you have over $5.4 million in assets, estate taxes are a non-issue. Gift taxes, however, are another matter altogether.

How To Maximize Annual Gift Tax Exclusions

For that small group of Americans who fear they may exceed the exclusion limits for the estate tax, there is another way to lower assets before death. The answer might be gifting. In 2015, seniors are allowed to give gifts of up to $14,000 without triggering a gift tax. This number doubles for married couples. So married grandparents can gift up to $28,000 each year without triggering a tax. Do this for five years, and you can reduce your potential taxable estate by as much as $140,000. This might make a difference for those who are just over the line.

Prepaid College And 529 Funds Are A Great Option

For Florida seniors looking to give grandchildren a nice inheritance while avoiding estate taxes, college is a terrific option. You may not want to give young children or grandchildren large sums of cash in hopes that they will use it wisely. But college funding is a great way to get them on the road to independence and financial security. With the cost of college education rising rapidly, you may wish to consider a unique program known as Florida prepaid college.

“Florida Prepaid” offers residents the opportunity to invest in college expenses now and lock in the rate. There are also similar 529 accounts, which are privately held and managed mutual funds that allow the money to accrue interest tax-free and remain tax-free as long as spent on qualifying education expenses.

Also Consider State-Tax Benefits for Out-of-State 529 Accounts

Not all Floridians are year-round residents. Many have homes and families in other states, some of which have state income taxes. Those states often offer 529 accounts with added state tax benefits. If you are a seasonal Florida resident who maintains a primary residence in Illinois, New York, Ohio, or any of the other states that offer such programs, you might consider contributing to a state-sponsored 529 in your home state. Doing so can result in huge deductions on your state income taxes. Here is one site that offers a great calculator to see how much you could save.

If you are looking for options in order to reduce your taxable estate, you should consult a Florida elder law attorney at the Millhorn Elder Law Planning Group who can help guide you through the complex maze of gift and estate tax exclusions to find the plan that works best for you and your family.

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