According to IRS statistics, over $9 billion has been given away--tax free. Gifting is an estate planning tool that most everyone in New Jersey may be interested to know about. Many people could be saving thousands of dollars in taxes each year by taking advantage of the annual gift tax exclusion.
The annual gift tax exclusion allows the gifting party to give each recipient a certain amount of property, cash or otherwise, tax free each year. Staying under this amount allows both the gifting party and the receiving party to avoid filing the gift on their taxes. For 2013, that amount is set at $14,000 per recipient. Married couples can combine their yearly amounts in order to give each recipient up to $28,000 per year in gifts, but a gift tax return will be required to ensure that both parties agreed to the gift.
Taxpayers will also need to be mindful of their state gift tax laws. Fortunately, here in New Jersey, there is no gift tax. However, any gifts given within three years of the gifting party's death may be subject to tax. This is due to the fact that if the gift is made within three years of death New Jersey considers the gift to have been made in contemplation of death.
Of course, people can give more than the IRS limit, but those gifts will be subject to taxation which is paid by the one giving the gift. As with many laws, there are exceptions such as medical and college expenses. Anyone that is interested in obtaining more information about the annual gift tax exclusion and how it can help in the state planning process may benefit from the advice of someone that is familiar with both estate planning and tax law.
Source: nj.com, "Rossi: Annual gifting can aid estate planning," Kurt Rossi, March 31, 2013