Let’s talk about gift taxes!

Under IRC Section 2503(b), the first $13,000 (plus cost of living adjustments) of gifts to any person, other than gifts of future interests in property, made during a calendar year are not included in the total amount of gifts made during the year. There is no limit to the number of recipients to whom a donor may make an annual exclusion gift each year.

Therefore, a client with numerous objects of his or her affection can significantly reduce their estate with tax-free transfers.

Let’s say John Doe has eight nephews and nieces. Each year he can make $124,000 (8 x $13,000) in gifts free of gift taxation.

Moreover, spouses can elect to great a gift of separate party made by the owner spouse to a third party as being made one half by each spouse. Thus, John and his wife Jane can make a $26,000 gift to each donee.  (Note – this tool is not available to California same-sex domestic partners or California same-sex married couples, as these are federal rules.)

Now that there is clarity in the Estate Tax exemption for the foreseeable future, gifting is one of those tools we can offer our clients to abate potential estate tax issues.

Want more information? Contact an experienced attorney or CPA.