Business Succession, Estate Planning, Real Estate, Uncategorized, Wealth

These Are the Ways to Never Pay Gift Taxes

A client recently told me he was going to take a car through probate, transfer it to himself, then gift it to his kid.

He got a little upset with me when I told him he was going to pay a gift tax.

I told him I don’t set the rules, but I know how to get around them!

If you’re going to gift an asset to another person during your lifetime, consider the following:

– Ask yourself if you have to make this gift in the first place. Sometimes you can be okay with the recipient just borrowing or using the asset rather than undertaking a full transfer of title.

– Make sure you have no control or “strings” attached to the gift. If you retain any control, it’s not a real gift in the eyes of the government.

– Make the gift come from both you and your spouse if you are married. The gift exemption amount is $16,000 per individual to another individual per year. Married couples can gift $32,000 together to a person each year.

– Make the gift to as many people as possible. If you are gifting money away, give each child $16,000 (or $32,000 as a couple).

– If the gift is greater than $16,000 (or $32,000 as a couple), consider simply putting the asset in your living trust. Your trust should permit you to use the asset how you want, and that includes “lending” the asset for the benefit of the person you want to send the gift. Once you pass, the person will receive the asset the same way as if you were gifting during your life if they are a beneficiary of the trust.

– Span the gift over a longer period of time. You could gift $16,000 (or $32,000 as a couple) over several years and never reach the gift tax limit.

– Lastly, time your gifts to the calendar. Gift taxes are paid on all gifts made during the calendar year, not a 12-month time period. That means you could gift $16,000 (or $32,000 as a couple) on December 31 and make another gift $16,000 (or $32,000 as a couple) on January 1st.

All of these strategies are ways to ensure that your assets go to whomever you want the asset to go and not to the government!

Happy gifting out there!