Pleasant problems are good to have, but they still require solutions. When the value of your estate exceeds the estate tax exclusion, which is just $1 million in 2013, you have one of those pleasant problems and we would like to present a partial solution.

Just about every successful person has learned the value of education, and there is more to it than pure knowledge. Many of us don’t remember everything that we had drummed into our heads while going to college, but that wasn’t the only purpose. When you embark on an educational path you set long-term goals for yourself and work hard to achieve them over a period of years. You do absorb useful information, especially if you go on to graduate school, but learning extends beyond that. College graduates walk away from campus knowing without question that they can do anything they put their minds to, and this is really the underpinning that you need to achieve ongoing success.

To get back to the pleasant problem of estate tax exposure, one way that you can reduce the taxable value of your estate is by giving tax-free gifts. There is a gift tax exemption that allows you to pay the tuition of an unlimited number of people equaling any sum of money free of the tax. So if you combine your need for estate tax efficiency with the foundation that an education can provide for your family members, a win-win situation is sitting there ripe for the taking.

It should be noted that the educational gift can only cover tuition; you can’t pay for fees, books, and other expenses using this exemption. But if you wanted to do that, you could use your $13,000 annual per person exemption to do so, and your spouse could do the same, making as much as $26,000 available to your gift recipients to cover expenses.

Tags: Educational Gifts, Estate Planning, Inheritance Planning