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End of Year Gift Giving and Estate Planning

Besides the personal fulfillment that comes along with making a gift, there are also various tax benefits associated with gift-giving. As 2013 draws to a close, take a moment to consider how you can utilize gifts to further your estate planning goals.

Gifts to Friends and Family

In 2013 and 2014, you may give up to $14,000 per recipient per year without affecting your gift or estate taxes. These "annual exclusion" gifts may be made to an unlimited number of recipients, and spouses can combine exclusions to transfer up to $28,000 per recipient per year. Gifts in excess of the annual exclusion must be reported to the IRS on a gift tax return, and the amount in excess of $14,000 reduces your lifetime federal gift and estate tax exemption.

Gifts can take many forms, including transfers of cash and real or personal property, provision of goods and services, and payment of another's obligations. The IRS also characterizes certain transactions as gifts, such as loans between family members with below-market interest rates and asset sales for bargain prices. For example, if you loan your son money but don't charge him any interest, you've made a gift to him. Or, if you take your daughter and son-in-law on an all-expense paid trip to Hawaii, you've made gifts to them in the amount of the plane tickets, hotel, etc. So, before writing a $14,000 check on December 31st, consider all other possible gifts you have made, and check with your tax advisor to determine whether a gift tax return should be filed.

Gifts to Charity

The end of each year brings with it a flurry of charitable giving activity. As people rush to make donations to squeeze in last-minute income tax deductions, don't overlook how charitable giving can benefit your estate. Like gifts to friends and family, all amounts you give to a charity during your lifetime are removed from your taxable estate. If your estate is subject to estate tax, every dollar gifted can save you approximately $.40 in estate tax.

Like gifts to individuals, charitable gifts can take many forms. From direct contributions of cash or property, to charitable trusts and annuities that allow donors to reserve an income stream, donors have options in structuring donations.

When making year-end gifts, remember that your estate planning attorney can help you navigate the complex and ever-changing gift and estate tax rules.

*This is general information only and not meant to apply to specific situations without consulting with a tax professional*

Written by John Christianson, Of Counsel.