Individuals can generally receive up to $13,000 a year as a gift without getting hit by a federal gift tax. In 2013, as a result of cumulative indexing, this amount is projected to increase to $14,000 per person.
Sometimes it’s the little things, and in this case the little updates to the tax code that are worth celebrating. If you haven’t heard already, the annual gift tax exemption will jump from $13, 000 to $14,000 per year per person starting in 2013.
This increase has been a small victory heralded by the financial press, included in a recent CBS MoneyWatch article titled “Gift-tax limits to rise in 2013.”
Now, the extra $1,000 may not sound like much if you haven’t been making full use of your gift limits. Nevertheless, when it comes to tax advantage wealth transfers, every little bit helps.
In fact, annual giving to loved ones is a time-honored tradition and strategy. Every portion of your estate given removes that much from coming under the estate tax scythe at your death. Remember: beginning in 2013 you can transfer $14,000 per year per person, to as many persons as you see fit, without reducing your lifetime exclusion (currently $5.12 million, but we’ll see what comes of that in 2013).
In addition, these gifts don’t count as charitable gifts either, which are without limit and can provide significant tax deductions when done correctly. If you are looking for even more ways to maximize your wealth transfers through gifting, then consult the original article. For example, two very specific and useful suggestions are to make gifts to cover educational costs (i.e., tuition) or medical costs.
Gifting is such a powerful wealth transfer method, and any small victory (even a $1,000 increase in the annual gift exclusion) is worthy of attention and consideration.
For more information and articles on estate planning and elder law topics, please visit our website and sign up for our free monthly e-newsletter. You can also friend our law practice's Facebook page (R Christine Brown).
Reference: CBS MoneyWatch (October 10, 2012) “Gift-tax limits to rise in 2013”