People often like to gift assets to loved ones if they are financially able to do so. Some enjoy being able to witness their loved ones using and benefiting from the gifts; others find that gifting assets is financially beneficial to their estate.
Many potential givers wonder if gifted assets are taxable. Gifts can have gift tax, estate tax, and income tax effects, both positive and negative, and can trigger filing requirements for the giver. Planning gifts carefully can help minimize any potentially negative tax consequences and maximize potential tax benefits.
Gifting Sums of Money
Some clients ask if they can legally gift a large sum of money to loved ones before they die. The answer is yes; however, such gifts may trigger tax consequences for the giver depending upon the sum of money given. Currently, the Internal Revenue Service (IRS) allows a person to gift up to $17,000 per individual to an unlimited number of recipients each year. If financial gifts to another person add up to more than $17,000 during the year, the giver will generally need to file IRS Form 709. However, filing Form 709 doesn’t mean that gift taxes are due immediately. There is a lifetime gift tax exclusion that allows many givers to never pay gift taxes. For 2023, the lifetime gift tax limit is $12.92 million.
In addition to giving cash gifts, money can be gifted to children or grandchildren through instruments such as 529 Plan accounts, IRAs, or Roth IRAs.
Gifting Properties and Other Real Assets
Assets such as real estate or investments can be gifted. From a tax standpoint, it may be beneficial for a property owner to gift appreciated assets to a recipient who is in a significantly lower income tax bracket than the giver because the recipient will likely pay lower taxes if and when the assets are sold. Gifts also can be made in the form of tangible personal property such as jewelry, cars, electronics, or furniture.
Gift recipients will likely want to know how they can avoid paying capital gains tax on gifted property. The recipient will need to know the giver’s cost basis and the fair market value of the property at the time of the gift, and if any gift taxes were paid on it. From there, an experienced estate attorney or tax professional can provide guidance.
Proper planning can help donors realize very favorable tax treatment for gifts made to charities during their lifetimes, as well as bequests made under a Will, revocable living trust, or beneficiary designations. There are a number of charitable giving techniques to provide for favorite charities without significant cost to either the donor or their desired beneficiaries.
If you’re looking for an estate planning attorney in Georgia who can help with tax planning and making gifts, please call us at 678-720-0750 or email us at info@MorganDiSalvo.com to set up an estate planning consultation.