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Estate Planning: Annual gifting review
Estate planning

Estate Planning: Annual gifting review

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Believe it or not, it’s almost the end of the year. Of course, we have to get through this week’s feast and the inevitable endless Christmas carols, but the end of 2021 is in sight.

As the season for gifting almost is upon us, I think it might be a good time for a gifting reminder. Gifting limits are one of the most misunderstood things that attorneys, accountants and financial advisers encounter. This is especially the case during this time of year when people start thinking about next year’s taxes.

First, it’s important to understand that there is no limit to the amount you can gift. I know that some of you are thinking that I’m wrong and that there is a $15,000 annual limit. Nope, there is not a limit.

The $15,000 that most people assume is a limit is actually just a triggering event. Each person can give another person up to $15,000 each year without any tax reporting. If you give more than $15,000 to any one person, you likely have to report the gift by filing a Federal Gift Tax Return.

Keep in mind that $15,000 is per individual. So, for example, if you and your spouse each wanted to make a $15,000 gift to a single individual, there is no reporting requirement.

If you make a gift to any one individual in excess of $15,000, you have to file a gift tax return but you likely won’t have to pay any gift tax. You can elect to use some of your lifetime unified credit so that you don’t have to pay any tax.

Here are a couple of other things to keep in mind when gifting.

If you want the gift to be made this year, make sure the gift is completed. If you write a check, make sure that the recipient cashes the check before the end of the year. If not, the gift may have taken place in 2022.

Remember that if you make a gift in kind, the recipient will receive your tax basis in the property. For example, if you purchased a stock for $1,000 and it’s worth $20,000 at the time you made the gift, you have to report it (because it’s in excess of $15,000) and the gift will include $19,000 in taxable capital gain. There is no step up in basis on gifts.

Finally, remember that there isn’t Christmas exemption. If you make a reportable gift, you have to file the return. The fact that it's a Christmas gift doesn’t change anything. If you exceed $15,000, report it.

Finally, the gift tax reportable amount increases to $16,000 in 2022.

Christopher W. Yugo is an attorney in Crown Point. Chris’ Estate Planning Article appears online every Sunday at Address questions to Chris in care of The Times, 601 W. 45th Ave., Munster, IN 46321 or to Chris’ information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant, or estate-planning specialist.


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