As the Festivus shopping season begins this Cyber Monday, I’d like to remind my readers of a few facts about gifting.
First, the “annual exclusion” for 2009 is $13,000. That means any person can give any other person a minimum of $13,000 without having to worry about the gift tax. A married couple can give a combined total of $26,000 to any one person free of the gift tax. The couple does not have to play any silly games in which the husband gives the wife money and then the wife makes the gift. Generally, either the husband or the wife can give the full $26,000 to any person.
In larger families, this allows a tremendous amount of wealth transfer, tax free from the older generation to the younger generation. A married couple can give $26,000 to each of their adult children, their adult children’s spouses, their grandchildren, etc., without having to file a gift tax return.
Second, there are certain types of “gifts” that don’t even count towards that $13,000 annual limit. For example, a person can pay the tuition and medical expenses of any other person, and that amount is not deducted from the $13,000. The tuition or medical expenses have to be paid directly. A grandparent can pay the private school tuition, whether grade school or college of their grandchild. Plus, they can still give each of that grandchild and her parents $13,000 (or $26,000 if married) in that same year.
Finally, a gift does not have to be in cash. Gifts of stock or other property can be a wonderful way to transfer not just the stock out of your estate, but the appreciation on the stock too. A gift of $10,000 worth of stock in Apple Computer on January 1, 2000 would be worth $71,807 today.
Not bad.
If you can do that for your children and grandchildren, then they’ll have nothing to say during the “Airing of Grievances.”