Imagine the looks of joy that will spread throughout your family as you start handing out $11,000 checks each year.
Besides increasing your popularity at family reunions, the gifts will also lower the value of your estate, meaning more money for your family members and less for Uncle Sam.
“The annual gift exclusion is available to any taxpayer, no matter how big or small their estate is,” says John Blatt, a Certified Family Business Specialist for Skylight Financial Group. “What you are allowed to do as a single taxpayer is give $11,000 per person to as many people as you care to without having to file a gift tax return.”
The recipients do not even need to be in your family.
A husband and wife are each eligible to give the full $11,000, so a child could receive a total of $22,000 from his or her parents each year.
The gift doesn’t necessarily have to be money, though.
“You normally see cash, but it can be any type of cash or property,” says Blatt. “Usually when you try to use other types of property, it is hard to have only $11,000 in value, though with something like real estate, you could divide it up.”
If, for instance, you have jewelry that’s worth $11,000 or less, it is acceptable to give that as a gift, but Blatt says you should have the property appraised at the time of the transfer so that you have documentation of what the items were worth.
There is also no minimum gift level, only a maximum. The gift must be given with no conditions.
“The donee or recipient must be entitled to immediate use and enjoyment of that gift,” says Blatt. “You can’t make a gift and then tell the person not to use it for 10 years. The other thing is, the annual gift exclusion is not cumulative. If you don’t use it this year, you can’t carry over to next year.
“Simplistically, if the estate is large enough to pay estate taxes, by using the gift exclusion, you can reduce the size of the estate by making gifts. If you are giving $11,000 per year, you will have given $110,000 at the end of 10 years. The idea is to potentially reduce the size of the estate by making lifetime gifts. Obviously this is for people who don’t need the money to live on. The person gets the opportunity to see the recipient enjoy the gift in their lifetime.”
The process for giving a gift is as simple as finding your checkbook if you want to give cash. Write a check for $11,000 or less to anyone you want, then present it to the person as a gift.
“Just make sure it gets cashed before the end of the calendar year so there is no mistake in which year the gift was made,” says Blatt. How to reach: Skylight Financial, (216) 592-7313
