The gift tax is a federal tax that is imposed on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies regardless of whether the property is given outright or transferred through an irrevocable trust.
To discourage people from gifting large sums of money to their children or other relatives to avoid estate taxes, the government imposes a gift tax. The theory behind the gift tax is that it levels the playing field so that everyone pays their fair share.
The amount of the tax depends on several factors, including the value of the property and the relationship between the donor and the recipient. The good news is that there are some ways to minimize or even avoid the gift tax altogether.
If you are thinking about making a large gift, it is important to consult with an experienced attorney who can help you navigate the complexities of the law and take advantage of all available loopholes. Contact our office today to schedule a consultation with our experienced attorney Polly Tatum.
How Does the Gift Tax Work?
The gift tax is imposed on the donor, not the recipient. However, it is important to note that the donor is only responsible for paying the tax if the total value of all gifts made during the year exceeds the annual exclusion amount.
For example, if the annual exclusion amount is $15,000 per person. This means that you can give up to $15,000 to any number of individuals without having to pay any gift taxes. If you are married, you and your spouse can each give $15,000 for a total of $30,000. The annual exclusion amount is subject to change each year, so it’s important to stay up-to-date on the current limit.
It is also important to note that certain types of gifts are exempt from the gift tax altogether. These include gifts made for medical or educational expenses as well as charitable donations.
How Can a Lawyer Optimize My Gift?
An experienced lawyer can help you take advantage of all available loopholes in the gift tax laws. For example, there are many ways to structure a gift so that it is not subject to the tax.
One common strategy is to give the gift in installments over a period of years. This allows you to stay below the annual exclusion amount while still making a significant contribution to your loved one’s future.
Another strategy is to create an irrevocable trust. This type of trust can be used to transfer property without incurring any gift taxes. However, it is important to consult with an attorney before creating an irrevocable trust as they are difficult to change or revoke once they have been established.
Should I Hire a Lawyer?
If you are thinking about making a large gift, it is important to consult with an experienced attorney who can help you navigate the complexities of the law. We have extensive experience helping our clients minimize their gift taxes. We will work with you to understand your particular circumstances and devise a plan that is tailored to your needs. Contact us today at (508) 571-5452 to get started.