Year-end Gifting
Are you feeling generous? Or have market increases pushed you into Estate Tax territory? Here are some ideas and strategies for year-end gifting:
Reportable Gifts. Starting on 1-2-2013 with the enactment of the American Taxpayer Relief Act (ATRA), the federal estate, gift and generation-skipping (GST) tax exclusion amounts are now $5 million per taxpayer. Indexed for inflation, in 2013 this means that individuals can gift during lifetime (or f rom their estate at death) assets up to $5,250,000 with no estate or gift tax. In 2014, the amount goes up to $5,340,000 per person.
The IRS requires you to keep track and report gifts. For example, if your gifts total $1 million, you have used this amount of your exclusion. You still have $4.34 million remaining (in 2014), of your total $5.34 million exclusion amount.
Annual Exclusion Gifts. No tax reporting is required for qualifying annual exclusion gifts of up to $14,000 made to unlimited donees each year. Spouses can combine this annual exclusion to double the size of the gift.
Direct Gifts for Education and Medical expenses. On top of the annual exclusion gifts, and without dipping into your lifetime exclusion, donors can pay for tuition, dental and medical expenses for anyone. The catch is that you must make payment directly to the service provider – you can’t just reimburse expenses which have already been paid.
Charitable Gifts. Philanthropic gifts to charitable organizations offer additional income tax savings with a charitable deduction on your personal tax returns. Direct gifts of cash and securities are simplest. Creative options also exist to retain income and save taxes with gifts to a Donor Advised Fund, Charitable Gift Annuity or Charitable Trust.
IRA Charitable Rollover. After age 70-1/2, you can avoid the income tax on the yearly required minimum distribution from an IRA by a direct donation to charity, limited to $100,000. This gifting tool is appropriate only for those who don’t need the funds during retirement. A receipt from the charity acknowledging the gift is essential for tax reporting. Don’t wait until 2014 to use this gifting strategy, which may expire on December 31st unless extended 
again by Congress.
For more information on year-end gifting or to schedule a time to review your Trust and estate planning, please call our office at 530-272-4292.