The IRS announced that the 2013 annual gift tax exclusion rate will increase to $14,000 per gift to a non-spouse, from $13,000 in 2012. In addition, the annual gift tax exclusion amount for gifts made to a non-U.S. citizen spouse will increase to $143,000, an increase of $4,000 from 2012.
The annual gift exclusion is in addition to your lifetime gift tax exemption, leaving you free to gift the maximum amount to whomever you choose and avoid a state tax bite when you pass. You get additional benefits if you gift to a 529 education savings account, but be sure the account is established in your name so you can withdraw the amount of the original gift with no tax consequence if necessary. You can also give up to five years of annual gifts all at once.
Married couples also get the advantage of gift splitting, which means that one spouse may make a gift on behalf of both, or $28,000 to each recipient starting next year. Gifts can be made with any asset, including cash, stock, collectibles and even partial interest in a business. However, assets that are hard to value must be appraised by a professional, and the giver’s cost basis transfers to the recipient, so if you gift $14,000 in stock that was purchased for $3,000, the recipient will be taxed on the appreciation above the purchase price at the time the stock is sold.
The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, they are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0042.