What's the best way to give money now

Giving gifts to family members and charity as long as you're alive could be a boon to them - and your estate.

Estate planning isn't just about how exactly you want your resources distributed once you die. It's about deciding how much you want to hand out while you're still alive. In the event that you plan carefully - and that means you don't hadiah untuk pria your property - giving enables you to reduce your taxable estate and provide advance help your beneficiaries.

There are two easy methods to give gifts without incurring the gift taxes:

You might pay an unlimited quantity in medical or educational expenses for someone else, if you supply the money right to the institutions where the expenses were incurred. You might give up to $13,000 a calendar year in cash or property to as many people as you like.

Anytime you give more than $13,000 to anybody person you need to file a gift-tax come back and the excess amount will be applied toward your lifetime gift-taxes exclusion of $1 million.

If at any stage your presents exceed that exclusion, you will have to pay gift tax on the surplus amount. There is the right news in that regard. The top tax rate on presents is gradually declining and can fall to 35 percent by 2010.

Keep in mind, too, that presents you give within three years of your death that exceed the lifetime gift-tax exclusion will reduce the amount of money you might leave to your heirs free from federal government estate taxes, according to qualified open public accountant P. Jeffrey Christakos of Initial Union Securities in Westfield, N.J. For example, if you give away $100,000 more than your lifetime exclusion within 3 years of your death, your estate-taxes exemption will be reduced by $100,000.

If you want to purchase a 529 college plan for a beneficiary, contributions are treated as presents. You may put in just as much as $65,000 in one year ($130,000 together with your spouse), but that contribution will be treated as if it were being manufactured in $13,000 installments over five years.

That means you can't give any longer money compared to that beneficiary tax-free during that five-year period. In the event you die prior to the five years are up, part of the cash you gave will be included in your taxable estate, particularly the $65,000 minus $13,000 for every year you were alive.

The tax consequence of making large gifts will get complicated. So if you have a large estate, consult with your financial or tax planner to see how much providing you can do without triggering a big goverment tax bill. Charitable donations are another way to reduce your estate. By buying charitable gift money and community foundations, those donations can stretch beyond your death.

Charitable gift funds, which can be found by Fidelity, Vanguard and others, permit you to make a tax-deductible donation, develop your investment tax-free, and then direct a contribution - in your name - to non-profits of your choosing once you like.