Senior Voice -

By Jonathan J. David
Senior Wire 

Gifting money? Tax info you need to know

 


Dear Jonathan: What is the annual gift tax exclusion amount for 2013?

Jonathan Says: The annual gift tax exclusion amount, which is the amount a person can give to another without incurring a gift tax, is $14,000 for 2013.

Dear Jonathan: What is the federal estate tax unified credit exclusion amount for 2013?

Jonathan Says: The federal estate tax unified credit exclusion amount, which is the amount of a person’s estate which is exempt from federal estate taxes, is $5,250,000 for 2013.

Dear Jonathan: I am in the fortunate position of having a rather large estate and many children and grandchildren. Since the total value of my estate is over the federal estate tax unified credit exclusion amount of $5,250,000, I would like reduce the size of my estate by making gifts to my children and my grandchildren. How much am I able to give to each of them without running afoul of the gift tax laws?

Jonathan Says: Assuming you are single, you can make gifts of $14,000 to each child and grandchild without incurring any gift taxes. So if you have a total of 10 children and grandchildren, for example, you could give each one of them $14,000 which would reduce the size of your estate by $140,000 gift tax free.

Dear Jonathan: My mother put me on her bank account with her so that I could help pay her bills when she got sick. She made me promise that after she died I would divide whatever is left in that account with my three siblings. Now that my mother has passed away, I am going to honor her request and divide that bank account, which is worth $100,000, between myself and my three siblings. Can I just write each of them a check for $25,000, or is there something more involved that I have to consider?

Jonathan Says: In 2013, the annual gift tax exclusion is $14,000, which means that an individual can make gifts of up to $14,000 per person without incurring gift taxes. Consequently, in your situation, if you write a check for $25,000 to each of your three siblings, you will have exceeded the annual gift tax exclusion amount by $11,000 for each gift, which will result in a taxable gift being made to each of them which will have a gift tax consequence to you. You can avoid the gift tax problem, however, by making a partial gift in 2013 and gifting the balance in 2014. For instance, you could give $14,000 to each sibling this year and then give the remaining $11,000 to each sibling next year. By breaking up the gifts this way, you avoid incurring gift taxes and also avoid the need to file a gift tax return.

If you are married, you can also avoid the gift tax problem by having your spouse join in the gifts. In other words, your spouse could join in your making of the $25,000 gifts to your siblings, and this would not incur gift tax because the gift would be treated as having been made one-half ($12,500) my you and one-half ($12,500) by your spouse. This is true even if only you actually made the gift, so long as your spouse consents to the gift. You will, however, have to file a gift tax return to reflect that your spouse joined in the gift. Good luck.

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, P.C., in Grand Rapids, Mich.

 
 

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