A person can now give $13,000 per year per person without affecting the amount one can gift during life or pass on at death federal tax free. The yearly allowance is raised periodically along with inflation, but in $1,000 increments. Therefore, the amount has just now been raised from $12,000 to $13,000.
Currently, any gifts above $13,000 per year per person must be reported on a federal gift tax form. Only after gifts over the now $13,000 limit accumulate to one million dollars does the federal government assess gift tax. Also, gifts above the $13,000 yearly per person limit reduce dollar for dollar the amount that can be passed on federal estate tax free. The amount that can be passed on federal estate tax free if no gifts have been made over the now $13,000 limit is $3.5 million in 2009, unlimited in 2010 but under current law will go back to one million in 2011. However, expect the law to be changed before 2011.
So what is one to do? For those who either don’t or won’t have the where with all or else don’t have the inclination to give to others (charities or spouses not included) over a million dollars, don’t worry about the $13,000 limit, give what you wish when you wish and if over the $13,000 per person per year, file a federal gift tax return. For those with assets over one million, if spouses give that doubles the amount that can be given per person per year to $26,000.
Then, giving to more people, not just children but perhaps also to spouses and/or grandchildren can dramatically increase the non-counted limit. So, with 3 children giving also to the 3 spouses can increase the non-counted amount to $156,000. If there are also 6 grandchildren the non-counted limit can be as much as $312,000 and still be given to family members. For additional information visit the newly revised “OSU Extension Basic Estate Planning Fact Sheet Series”, including a fact sheet on giving at: