Give the Gift of Smart Estate Planning
This holiday season, save your loved ones from paying estate tax by providing a tax-free gift while you are still here to see the smiles and gratitude on their faces. How does the gift tax work, and just how much can you gift without your heirs having to pay a large sum in taxes?
Gift Tax Limits
As of 2016, the limit that you can gift to a person during a calendar year and have it be tax-free is $14,000 (not a bad stocking stuffer). Plus, a gift that is to be shared by a couple can be up to $28,000 because the tax law applies per person.
Gifts that exceed $14,000 per person per year will have to be reported by the recipient using IRS Form 709 – a Gift Tax Return form.
There is also an end around that will let you gift above the $14,000 amount. This is done by making payments directly to an educational or medical provider. In other words, you can pay things like college tuition or an unpaid hospital bill as a gift without being confined to the gift limit, and the amount will still not be considered taxable income for your loved one.
Important Reminders About Gifts and Estate Planning
Currently, estate tax does not apply if an estate is valued at less than $5.45 million. However, any time you provide gifts to an individual that exceed $14,000 in a single calendar year (except if you are sending the money directly to an educational or medical facility) that gift gets subtracted from the $5.45 million. For example, if you give $2 million in gifts to your loved ones in excess of the annual gift amounts, then when you pass away, only $3.45 million will be tax-free under estate tax law.
To learn more about how the estate tax and the gift tax work, contact the Petrov Law Firm at 619-344-0360. We can help you make sure that your money goes to your loved ones, and that your heirs won’t have to share your gift with the IRS.
