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End of Year Gifts

Allison Busch
Dec. 6, 2016

Looking for the perfect gift for that special someone?

With the holiday shopping season in full speed, parents and grandparents are searching for the perfect way to show their love for their children and grandchildren. While hand- held electronics are enticing, the very best gift may be just a pen and a checkbook away.

So, what is that perfect present?

It's writing a check for up to $13,000 to a loved one. It's a gift that's not only great to receive, but also provides tax advantages to the gift giver. 

This year, one can make a gift of up to $13,000 per person without having to worry about gift tax consequences. A married couple may give up to $26,000 per person.  As long as a gift to an individual does not exceed $13,000 in a calendar year, it is exempt from federal gift tax. This amount is referred to as the "annual exclusion."  (The amount was $10,000 for so long that many people still think the annual exclusion amount is stuck at $10,000, but it has edged upward in the last few years).

Making annual exclusion gifts is a simple way to transfer wealth to younger generations free from gift tax. The transfer of wealth through annual gifting may also decrease the gift giver's estate taxes.

For example, if Grandma has two children and five grandchildren, she can gift  $91,000 this year and another $91,000 in January, decreasing the size of her estate by more than $180,000.  While in 2010, there is no federal estate tax in place, the federal estate tax is scheduled to come back in 2011, and will impact all estates greater than $1 million. Additionally, many states impose their own estate tax. Thus, decreasing the size of an estate by making gifts could bring about a significant tax savings to a family.

Before making annual exclusion gifts, it is important to take into consideration the impact making these gifts has on your estate plan and your long term care plan. A gift may be appropriate from a gift tax and estate tax perspective, but it may also cause problems from a long-term care planning perspective, so speak to a professional before getting out that checkbook.

The information contained in this article is provided for general informational purposes only, should not be considered to be legal advice, does not necessarily reflect the opinions of Busch and Busch, LLP or any of its attorneys, and may  not  be correct, complete, or up-to-date. This article is not intended to create, and access to or receipt of information included in this site does not constitute, a lawyer-client relationship. No one should act upon this information without seeking professional counsel.  In some jurisdictions this site may be considered advertising. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Care.com may contain links to other resources on the Internet. Those links should not be interpreted to have been endorsed by Busch and Busch, LLP.

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