Looking for Legal Advice? Send Us Your Questions and the Experts at Ajalat & Ajalat, LLP Will Weigh In
Do you need legal advice? We’re starting a new section in our paper where legal professionals answer your questions – the law abiding.
Ajalat and Ajalat, LLP is a full-service law firm located in North Hollywood. Ajalat and Ajalat, LLP has over a century of combined experience and can answer questions in almost every area of law. So if you’ve got a quandary for the pros send it over to firstname.lastname@example.org or call (818) 762-2171.
In the meantime, they’ll be giving you some freebie tips – things you might have never known you needed to know. Until now.
How Much Money Can I Give as a Gift Without Paying Taxes?
Currently, you can give gifts of up to $13,000 without incurring a gift tax. Further, that amount is per year, per donor, and per donee – so that this year every person can give $13,000 to any number of individuals without any tax implications.
This can be a valuable estate planning tool for those that need to reduce the size of their estate, and thus estate taxes, in contemplation of their death. For example, say an older couple has accumulated a few million dollars in assets, some of it in cash, and they have seven heirs (e.g., two children and five grandchildren). This year, they can gift $26,000 to each heir ($13,000 from husband, $13,000 from wife), thereby reducing the size of their estate by $182,000 ($26,000 x 7 heirs). They can do the same thing next year as well, and reduce their estate by another $182,000. Further, payments made directly to educational or medical providers are not included in the $13,000, so those can be additional non-taxed gifts. By following this plan year after year, the couple could conceivably bring the size of their estate down below the estate tax exemption threshold for the year they die (currently $5.0M per person, but going down to $1M in 2013), thereby saving their heirs hundreds of thousands of dollars in estate taxes.
For larger gifts, a tax will be imposed on any amount over $13,000 unless the taxpayer elects to apply the overage to their lifetime $5,000,000 gift tax exemption. For example, in any one year, the older couple above can gift a total of $382,000 to their heirs, apply $200,000 of it to their lifetime gift tax exemption, and pay no tax on any of it. (However, utilizing their lifetime gift tax exemption for this purpose will cause a dollar-for-dollar reduction in their estate tax exemption.)
The information contained herein is not, nor is it intended to be, specific legal advice and although deemed to be accurate, you should not rely on it without consulting an attorney.