The tax code allows you to give away up to $14,000 each year to as many people as you want, without triggering gift tax. If you and your spouse “split” your gifts, you can double this $14,000 annual gift-tax exclusion and give $28,000 per recipient.
If you’re thinking of sharing your wealth, here are some important gift-giving considerations.
• All gifts during the year, including birthday and holiday presents, count toward the $14,000 (or $28,000) annual gift tax exclusion. For example, say you give a $500 birthday present to your grandchild. You may give another $13,500 to that grandchild during the year without triggering the need for a gift tax return.
• A gift made by check isn’t complete until the recipient actually deposits or cashes the check. Plan accordingly when making year-end gifts, especially if you want such gifts to be counted toward this year’s gift-tax exclusion.
• For a gift to be valid, you must part with ownership. Pay special attention to gifts of stock in the family business or gifts of your personal residence.
• Carefully consider the type of asset before you give it away. Property that has substantially appreciated in value may not be a good candidate for giving, especially if you are elderly. If you own stock or other property that has declined in value since you acquired it, you may be better off selling the property and giving away the proceeds. Giving away a life insurance policy can be an excellent strategy, but it’s subject to some tricky rules.
Of course, you should never make a substantial gift unless you can afford to part with the property. And any gift-giving program should be part of an overall estate plan. Remember, too, that gifts to individuals are not tax-deductible.
Tis the season for tax planning. Feel free to give us a jingle.