Hinshaw Estate Planning Blog

Tuesday, November 1, 2016

The Gift Tax Exclusion

The Internal Revenue Service provides a yearly limit on how much you can give to someone else without paying gift tax.  In 2017, the annual exclusion for gifts will remain $14,000.

Spouses can combine their annual exclusions to double the size of the gift.  For example, this year a married couple with a child who is married and has two children could make a joint cash gift of $26,000 to the adult child, the child’s spouse and each grandchild – four people – providing the family with $104,000 a year.  Gifts that exceed the limit count against the lifetime exclusion, which this year is $5.49 million ($10.98 million for married couples).

If you exceed the limits, you could wind up owing gift tax of up to 40%.  Even if you don’t, your lifetime gifts would reduce how much you can pass tax-free through your estate plan.

Now is the best time to start gifting in order to reduce your estate and avoid estate taxes because you never know when the whole system may change.  In past years the federal estate and gift tax was as low as $1 million and the tax on transfers above that amount have been as high as 55%.

Hinshaw Estate Planning is a practice group of Hinshaw, Marsh, Still & Hinshaw and assists clients in matters related to Estate Planning, Asset Protection, Planning for Children, Inheritance Protection, and Estate & Trust Litigation in the areas of Saratoga, San Jose, Los Gatos, Monte Sereno, Campbell, Santa Clara, Sunnyvale, Cupertino, Los Altos, Los Altos Hills, Mountain View, and Palo Alto within Santa Clara County, the areas of Menlo Park, Woodside, Atherton, Portola Valley, San Carlos, and Redwood City within San Mateo County, and the Greater San Francisco Bay Area.

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