Completing Gifts and Taxes

Trust Book by Jay Lashlee Book

Verify Year-End Gifting Date

Verify the timing of making year-end gifts. A transfer of property is only counted as a gift once a donor has unconditionally relinquished all control over it by the year-end date.

Here are the main rules concerning gifts:


Gifts by Cash

The cash must be withdrawn or a verified source cited by Dec. 31 to count as a year-end gift, so if you have given a gift via cash, be sure the recipient follows through by depositing the matching amount in cash before the end of year.

Gifts by Check

The check must be cashed or deposited into the recipientís account by Dec. 31 to count as a year-end gift, so if you have given a gift via check, be sure the recipient follows through by cashing or depositing the check before the end of December.

Gift of Securities

The securities must be physically transferred into the recipientís account by year-end.

Charitable Gifts

If you are making a donation by check, it must be mailed by Dec. 31. If you are making a donation via credit card, you must also make it by Dec. 31, even though you will not pay for it until the following year.

Large Gifts

Currently, gifts above the $13,000 annual exemption count toward your lifetime exemption, which was $5 million in 2011 and $5.12 million in 2012. The gift exemption limits will most likely change often, so you should consult with your estate planner about the tax consequences of gifting more than $13,000.

Loan Forgiveness

Wealthy families that used all of the former $1 million gift exemption and turned to family loans to transfer assets may wish to consider forgiving the loan. You must properly format the agreement.

Balanced Gifts

Many families used the $13,000 a year exemption to give money to grandchildren - but sometimes a span in ages can create an overall gift gap of several hundred thousand dollars. Families wishing to equalize things among grandchildren by closing this gap can include language in a will or trust to do so, which can help avoid conflicts later on.

Business Valuation Discounts

You can move at least part of a family business out of your estate by taking advantage of the current gift-tax exemption and valuation discounts for minority stakes in a business. Valuation discounts may be disappearing soon, so taking advantage of this in 2012 could be advantageous to your estate.

Spousal Limited Access Trusts (SLATs)

Spousal limited access trusts (SLATs) are used by those who want to save on taxes but may be worried about giving too much away. A SLAT can remove assets from a husband or wife's estate while taking advantage of the full gift-tax exemption, and if fortunes change after the trust is funded, the trustee can still make distributions to the surviving spouse.

See more...

  1. Gift Transfers & Taxes
  2. Gifts Sources, Gift Distributions, and Gifting

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