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Have you considered the benefits of making annual gifts?

The annual exclusion gift is just what it says: Making an annual monetary gift in some form to the family member or members you designate qualifies as an annual exclusion from federal gift taxes.

This is a prudent part of your estate planning strategy, and if you have not begun to take advantage of it, you may want to discuss the idea with your attorney.

Why make an annual gift?

There are two main reasons for annual exclusion gifts. First, there are tax benefits, but there is also the satisfaction of making certain distributions during your lifetime so you can see your close family members enjoying a portion of the assets they may inherit. Gifts can be cash, stocks and bonds, even real estate.

Reducing estate taxes

The deductions and exemptions that are available for the purpose of reducing estate taxes include:

  •         Lifetime exemption
  •         Marital deduction
  •         Gift and estate tax charitable deduction
  •         Annual exclusion gifts
  •         Direct transfers for education and medical care

The Internal Revenue Service sets the amount for the annual exclusion gift, and for 2016, that amount was $14,000. Over time, you can transfer considerable sums from your estate, together with any appreciation, and continue to reduce the amount of tax you would have to pay.

Staying inbounds

You and your spouse may both use the $14,000 annual exclusion gift, which doubles your gift-giving ability. So, for instance, if you want to give $20,000 to your son, the IRS will want to know where the money originates. If it comes from a joint account titled with both your names, that gift will work. If the $20,000 comes from an account that is in the name of your spouse alone, he or she will have to report $6,000 to the IRS as a taxable gift. Your attorney can help you navigate this somewhat complex landscape, but suffice it to say that any complexities are worth the benefits you will receive when you get into the annual gift-giving spirit.

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ANDERSEN PLLC
17015 N. Scottsdale Road, Suite 225
Scottsdale, AZ 85255

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