Be Sure to File Your Gift Tax Return…the IRS is Watching

If you give anyone more than $13,000 during the year, then you are required to file a gift tax return with your income tax return. Unfortunately, many do not know about this requirement, choose to ignore it, or do not realize that they have made a gift. Whenever you give someone something that they did not pay for, that is a gift.

Currently, the IRS is actively looking through registered deeds in various states to find deeds where parents have added children to their homes but have not filed a gift tax return. If you are caught, the consequences can be severe, and it will be too late to “fix it”.

If you have made gifts, but not filed gift tax returns, talk to your tax adviser to see what you need to do before the IRS comes calling.

Don’t trust your children to do what they say they will do

Of course, we all want to trust our children. For many, their estate plan is trusting a child to do what they know the parent would want them to do. It might be making a bank account joint with one child who “knows” it is to be split between all of the children. Or a house owned with a child who “agrees” that it is to be sold with proceeds divided between the children. But, what if they don’t? Or, what if they planned to, but died before they were able to?

I am reminded of a money magazine article from a couple of years ago. When asked if it would be OK not to do what they promised the parents they would do, 75% of the adult children said it would be OK not to keep their promise! Are your children part of the 25% who can truly be trusted? Do you want to bet your other children’s inheritance on it?

Finally, if your children do, in fact, do what they agreed to, have you considered the negative tax consequences that they might incur?

Having a Will does not avoid probate!

When asked why they want have a Will, many people tell me it is because they want to avoid probate.  A Will, however, never avoids probate. It only becomes effective once you have died and a probate estate has been opened with the Probate Court. The Will then serves as your instructions to the Court as to how you want your estate distributed.

Not everyone needs to avoid probate. However, if you want to avoid probate you need to do something other than having a Will.

Don’t forget your pets when making your estate plan

Have you made arrangements for someone to care for your pets if you become incapacitated? Who will care for them when you die? Have you set aside funds to cover the cost of caring for your pets? What rescue/shelter/organization would you like to have your pets if no one is able or willing to care for them?

These are many of the questions that need to be answered if you have pets. The answer might be to have a Pet Guardian Agreement and/or a Pet Trust.

For more information about planning for your pets, visit Fido’s Future, a site dedicated to educating pet parents about how to protect their pets through planning.