Oklahoma City estate planning lawyers are frequently asked questions about gifting strategies. It is logical to consider making gifts to people who are on your inheritance list while you are still alive, but you have to understand the tax consequences.
First off let’s look at the recipient of the gift. If you give your son a $30,000 gift during a single calendar year does he have to pay income tax on this influx of money?
The answer is that the recipient of a cash gift does not have to claim the value of this gift on his or her income tax return. However, if you were to give your son a $30,000 certificate of deposit any interest that it earned after the gift is made would be taxable income to your son.
As the giver of the gift you do have potential tax exposure. Using the above example, you are allowed to give $13,000 to any one person during a given year free of the gift tax. So, $17,000 of the gift that you gave your son would be taxable.
There is a lifetime gift/estate tax exclusion that you could apply. In that case no tax would be due. You would have to file a U.S Gift Tax return for the amount in excess of the annual gift exclusion. Since the estate tax is unified with the gift tax exemption, no tax is due until you exhaust your total lifetime exclusion. Just remember: your lifetime exclusion will be reduced by the amount of the gifts you gave using the unified exclusion.
If you make an appointment to speak with a good estate planning attorney your lawyer will explain the tax consequences of gifting in detail and help you devise a plan for the future with tax efficiency in mind.
Larry Parman
Author, President and Founding Attorney
Parman & Easterday
- Straight Answers From an Estate Planning Lawyer - May 25, 2023
- How Can You Leave an Inheritance to a Dog? - May 23, 2023
- Estate Planning: Where Do You Begin? - May 18, 2023
