How Can I Optimize Monetary Gifts to My Family?

Not planning your giving can have unintended consequences.

Gift giving can be a useful estate planning tool.

But it must be done right.

According to a recent nj.com article titled “Gift tax consequences for you and your heirs,” you could end up owing taxes if you do not give wisely.

There are some gifts that are exempt from taxes.

There are also some gifts that are exempt under specific circumstances.

What gifts are generally nontaxable?

• Gifts for tuition*
• Gifts for medical expenses*
• Gifts to your spouse
• Gifts to a political organization
• Gifts to qualifying charities

Keeping your gifts to under the estate and gift tax exemption is important.

What is the exemption limit?

The estate and gift tax exemption is $5.49 million per taxpayer.

That is the total amount of "taxable gifts" you may make during your lifetime, but doing so means you have correspondingly reduced the amount you may exempt from estate taxes when you die.

In short, you can use it all of the overall exemption during your lifetime, at your death, or some now and the balance later.

Next year, the amount will be $5.6 million.

Your federal income tax is not impacted by giving gifts to family or leaving assets to your heirs.

On the other hand, charitable contributions can provide income tax deductions.

When giving gifts to your family, you can give $14,000 per person each year without it counting towards your lifetime gift exemption.

This amount will increase to $15,000 starting next year.

For gifts below this amount, you need not file a gift tax return.

Work with an experienced estate planning attorney so your gift planning is carefully coordinated with your overall goals.

*To qualify as excluded gifts, these gifts must be paid directly to the relevant institution for benefit of the donee and not directly to the donee.

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: nj.com (October 5, 2017) “Gift tax consequences for you and your heirs”