Before the end of 2014, there are some estate and gift tax planning opportunities and gift tax savings that you may want to consider. One such gifting opportunity is the Annual Gift Tax Exclusion which will be covered in Part 1 of this post.  

The Annual Gift Tax Exclusion allows you to gift up to $14,000 per recipient in 2014 without incurring any federal gift tax obligation. Spouses together may gift up to double that amount ($28,000) per recipient in 2014. In other words if you and your spouse have 5 children and 5 grandchildren, you can gift $28,000 to each child and grandchild without having to pay federal gift taxes on the gifted amount of $280,000. If the recipient is a minor, you can set up a trust for the child and annually contribute to that trust for the child’s benefit. If the minor is your grandchild, your son or daughter can act as trustee, or anyone else you would like to take on that role. Also, the recipient does not have to be related to you. This exclusion allows you to give gifts every year without incurring a tax liability and, for estate planning purposes, this gift planning opportunity allows you to reduce your estate amount and your potential estate tax exposure.

Regarding the potential estate tax exposure, in 2014 the lifetime federal gift and estate tax exclusion is $5.34 million ($10.68 for married couples), the largest gift and estate tax exemption in history. This means that, as the law stands today, up to and including $5.34 million of the value of what you give away during your lifetime (above the annual gift exclusion) and what is remaining in your estate at your death is not subject to federal estate and gift taxation. For example, a single person passes away in 2014 and gave away $2 million (over and above the annual exclusion amount) during his/her lifetime and has $3 million in their estate at death. The estate of this person will not owe any estate taxes because of the lifetime exclusion of $5.34 million.

Please note that any gifts above the annual gift tax exclusion of $14,000 per recipient (or $28,000 for a married couple) will require filing a gift tax return even if no tax is due. Before making such a gift, please consult with your estate planning attorney.

In Part 2 we will address the topic of gifting through a 529 plan.

Gita K. Nassiri | Attorney at Law/ CPA
NASSIRI LAW FIRM, INC.
760.216.9593
2794 Gateway Road 
Carlsbad, CA 92009
www.nassirilawfirm.com