Gifting

• 1). Choose the persons you would like to designate as heirs. They do not necessarily have to be family members, and the heirs may change periodically depending on the relationships you have with them.
  
  
• 2). Stay up-to-date on the dollar amount limit the IRS sets for gifting. This can be found in IRS Publication 950, or you can ask any accountant or financial planner. In 2010, the annual limit for the amount a person can gift tax-free is $13,000.
  
  
• 3). Keep track of the amount of money you gift over your lifetime. As of 2011, a person may gift up to $1 million in his lifetime tax-free. This may change periodically and can also be found in IRS Publication 950.
  
  
• 4). Subtract the amount you gift over your lifetime from $5 million, which, in 2011, is the amount the IRS permits you to leave to your heirs tax-free when you die. For example, if you gift $500,000 to your heirs while living, only the first $4.5 million of your estate is tax-free when you die. The exempt limit is subject to change periodically. For example, in 2010, the IRS removed the limit, so a person could leave his entire estate, no matter what the value, to his heirs tax-free.
  
  
• 5). Inform the recipient of the reason you are making the monetary gift and the amount. He should tell his accountant or tax preparer that he received the money and where it came from.
  
  

Designating Beneficiaries

• 1). Gather information about each of the retirement accounts you and your spouse own. Decide who will receive the money in these accounts once you pass away.
  
  
• 2). Either print the beneficiary forms from your online resource for the account or contact the custodial institution or brokerage firm. Some institutions will not require a form, just an online entry.
  
  
• 3). Submit the name, or names, of the beneficiaries and the percentage of the account total they will receive after you pass away. This allows the heir to perform a trustee-to-trustee transfer into a retirement account of his own without incurring any estate or income taxes.
  
  
• 4). Inform the beneficiary how to handle the account once you pass away. Make sure she understands that simply withdrawing the funds will subject her to taxation by the IRS. She should contact the broker or institution following your death to complete the trustee-to-trustee transfer of the funds.
  
  
• 5). Check the beneficiary each year as part of your annual financial review. This is the primary means of determining the person who will receive the money in a particular account, outweighing what is written in your will.