If you go forward without professional guidance you can wind up making some costly decisions. Making assumptions without the appropriate background information can often lead to negative outcomes, and this is something to keep in mind when you decide that you would like to give gifts to your loved ones.
Some of these assumptions may be based on totally logical grounds, but logic doesn’t always hold sway when it comes to the powers that be. For example, let’s say that you win a lottery or otherwise enjoy some sort of financial windfall and you want to share some of the wealth with your children.
The influx of income is going to be subject to taxation. So if you win the lottery the income will be taxed rather heavily by both the federal government and the state of South Carolina. You may be left holding perhaps $.65 or $.70 of every dollar that you won.
Since you paid such high taxes on the winnings you may make the totally rational assumption that you can give any portion of this remainder to anybody that you want to without paying more taxes.
Unfortunately, this is not the case. Gifts that you give would be subject to the federal gift tax, and right now it carries a 35% rate; next year this rate rises to 55% if the laws stay the same as they are right now.
There are however ways to arrange for the transfer of your assets to your loved ones in a tax efficient manner if you take the appropriate legal steps. So the key is to be patient, talk things over with a good South Carolina estate planning lawyer, and ultimately act in a measured and informed manner.
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