by Amy F. Sahler, Director of Fiduciary Services
by One of the benefits of annual exclusion gifting is the tax-efficient transfer of wealth to children and others without incurring a gift or estate tax. Annual gifting is a simple and effective way to both transfer wealth and to reduce the size of one’s estate. Making direct payments for an individual’s education and/or medical expenses can be another way to reduce the size of an estate and are not considered “gifts” for tax purposes.
The current IRS annual exclusion gift amount is $15,000. In any calendar year, an individual can give up to the gift amount to an unlimited number of people. Recipients may include family members and non-family members. Married couples can combine their annual exclusion gifts, but any gifts split between spouses must be reported to the IRS on the US Gift and GST Tax Return. In addition, gifts between spouses who are both US citizens are exempt from any gift tax because of the unlimited marital deduction. Annual exclusion gifts may consist of cash or in-kind assets such as marketable securities. Gifts of income producing property may realize the additional benefit of shifting income from an individual in a high income tax bracket to a child or grandchild who is in a much lower tax bracket.
When making a gift to an individual in the form of a check, the gift is not considered “complete” until the check is cashed and has cleared the donor’s bank. If uncashed, it would be considered an incomplete gift over which one had “dominion and control”. To avoid any IRS scrutiny, it is best to make gifts early each year. Making gifts in January also ensures you don’t lose the opportunity to make your intended gifts.
We urge clients to take advantage of the tax free benefits of annual exclusion gifts and not delay their gifting. It is good planning, especially when gifting for the purpose of reducing estate taxes.
If you have not made your 2018 annual exclusion gifts, time is running out. complete your gifts without delay and make a New Year’s resolution to make future annual exclusion gifts in January of each year.
To discuss this topic further, please contact your relationship manager, or Amy Sahler, Director of Fiduciary Services, at 617-338-8108, email: [email protected].
Important: This article does not contain any legal or tax advice. You should always consult with your attorney, accountant or other professional advisors before changing or implementing any tax, investment or estate planning strategy.
IRS Circular 230 Disclosure: Pursuant to IRS Regulations, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.