Gift taxes can be minimized once you understand the rules of the road.
So, you want to give monetary gifts to your family?
You can do this.
If done wisely, you can also do this while saving money.
According to an article in Forbes, titled “Why The Gift Tax Matters So Much to You,” certain transfers from your wealth are actually excluded from the gift tax.
No, you read that right.
You CAN make fully tax-free lifetime wealth transfers.
As can individual you give $14,000 per year to one person or divide the gift between several people without paying gift taxes.
Are you a couple?
You can claim $28,000 per year to anyone of your choosing.
Are there any requirements?
Yes. You must file a Form 709 gift tax return if one of you is actually contributing more than the $14,000 limit to a given individual.
The lifetime exemption.
The lifetime exemption is now $5.45 million for an individual and $10.9 million for a couple.
As long as your lifetime gifts do not exceed these limits, the gifts will not be taxed.
The amount remaining you do not use will become your estate tax exemption amount if needed.
File Form 709
Here is the filing I mentioned above.
By filing a gift tax return, both you and the government have records of how much of the gift tax you have used when you exceed the annual gift tax exclusion amount.
Give to a 529 Tuition Plan
By giving a gift to one of these plans, you can exclude up to the annual $14,000 limit.
If one of your loved ones needs the money, you can give $70,000 in a year and use the exclusion value of five years.
One thing to note: by making giving $70,000 in a single year, you must wait four years before giving this individual another gift.
Give Directly to an Institution on Another's Behalf
Are you paying directly for medical or educational expenses?
Transfer the money to the institution rather than giving it to the individual to pay the bills.
You may give an unlimited amount, unless you make the gift to the individual.
Then, it becomes taxable if it exceeds the $14,000.
As the saying goes: it is better to give than to receive.
By being smart and knowing the rules, you can do both.
An experienced estate planning attorney can help counsel you to satisfy these important rules.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Forbes (July 17, 2016) “Why The Gift Tax Matters So Much to You”