If you are concerned about estate taxes and want to use every tax planning strategy available to preserve wealth for your family, it is essential to take advantage of the annual gifting limits. The annual amount you can gift tax free changes periodically, so before making a gift of any kind, such as money or property, be sure to verify the current gifting limits.
For 2013, the amount an individual can gift tax free to any individual is 14,000 dollars. For a married couple, the total amount that can be gifted tax free to any individual is 28,000 dollars. For details on the annual gift tax exemption amounts for 2017 and 2018, see gifts and gifting. To review the IRS bulletin on current annual gift tax exemption amounts, refer to the
If You Gift in Excess of Annual Limits
If you give gifts in an amount that exceeds the annual gifting limits, you may be required to file a federal
gift tax return. This increases the complexity of your tax returns and could result in additional costs. The person that makes the gift, known as the donor, is responsible for paying any taxes due as a result of the gift. Gift tax returns are filed on IRS Form 709. For information on when this form must be filed, see
Gift Tax Return.
Avoid Common Estate Planning Mistakes
1. Many estate planning clients believe they are not wealthy and therefore, do not need to consider a gifting strategy. While you may think your estate is small enough to avoid federal and state estate taxes, the government may view it differently. When you sit down and actually calculate the value of all your property, investments, and financial interests, you may be surprised by the total amount. When you first begin to make an estate plan, you may not realize the actual value of assets such as collectables, antiques, vehicles, stocks, bonds, and real estate. As a result, people that consider themselves to be of modest means may in fact leave behind an estate that is subject to significant taxes.In 2017, we are seeing an ongoing push by the government to increase taxes at various levels. This is unlikely to abate in the near future, which means
estate taxes could easily rise and exemption amounts may be reduced. An estate planning lawyer or CPA can advise whether taking advantage of the current annual gifting limits will ensure more of your estate passes to your intended beneficiaries.2. Waiting for a certain event to occur before making a gift is another common estate planning mistake relating to gift taxes. Instead of waiting for events such as graduation, marriage, birth of a grandchild, or the donee attaining a certain age, it is generally more advantageous to establish an annual gifting program or another type of planned gifting strategy based on annual gift tax exemption amounts.3. Selling an asset you plan to gift without consulting a tax professional or attorney is another common estate planning mistake. Parents and grandparents often gift stock, real estate, collectables, and other types of assets to children and grandchildren. Before making this type of gift, it is important to understand how the cost basis on the gifted asset will be calculated and how the tax treatment of gifted property will affect both the donor and the donee. Whether you are planning to sell an asset to make a gift of cash or are planning to gift an asset in kind that has appreciated in value, seek the advice of a CPA or estate planning lawyer first to avoid costly mistakes.
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