The Listen to Lawrence Letter: Leaving assets to adult children

READER QUESTION:

Dear Lawrence:

Your info is great, and I really appreciate reading your Listen to Lawrence Letters. I just read your response regarding the “unlimited marital deduction.”  What if I leave all of my assets to my adult child? What are the tax rules with this?

MY RESPONSE:

While there is no estate tax when you leave unlimited amounts to your spouse at death (unlimited marital deduction), no such equivalent exists when you leave assets to your children. There is no unlimited child deduction, and if you think about it, if that were true, there would no longer be an estate tax unless you left your assets to someone other than your children. Therefore, when you leave assets to your children, it will be subject to estate tax unless the estate tax exemptions apply (and they do for most people). The New York State exemption is $7.35 million, and the federal exemption is $15 million.

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