I am sure that most people know that you are allowed to give a certain amount of money to beneficiaries tax free. But what some people might not know is what the limits are and what the lifetime limit is, and what the tax implications are for different scenarios. Annually, you can give $12,000 per year per person to as many people as you wish without them having to pay any taxes on the money. If you are married, you and your significant other can EACH give $12,000 per year per individual, so in theory, your rich grandparents could give you $24,000 per year and you would not have to pay taxes on that. Over one’s lifetime, you are allowed to give $1,000,000 tax free, over and above your yearly amount. So, anything you give over $12,000 per year is deducted from that $1,000,000 lifetime amount.
For 2007, my wife and I are going to start working on an estate plan, just in case something were to happen to one or both of us. Due to a recent death in our family, we have seen the hardship that families go through when nothing is written down in terms of what to do in case of an emergency. Here are some tips that should get you started in creating your own estate plan.
Trent over at The Simple Dollar has a great article up about beginning his investing in mutual funds…index funds to be exact. He outlines his fears as to why he has not been in them before, how we went about making his decision, and the fund that he ended up going with.
We have been in index funds for quite some time now, and overall I am pretty happy about their performance, as they have done ok all without any effort by me. I do put money elsewhere as well…money markets, individual stocks, a Roth, a bond fund and a small cap fund..but the index fund normally is the most stable of the “stock oriented” activities we partake in. We have a lot of our stuff at TRowePrice, but Vanguard is another great company to go with.