Saturday, November 17, 2012
At the beginning of 2013, the annual gift tax exemption will increase from $13,000 to $14,000. This is good news for spouses because they can combine their individual gift tax exemptions to double the amount that they can give tax-free. If a person makes a gift that exceeds the annual gift tax exemption then the exceeded amount goes towards the lifetime gift tax exemption. If a person exceeds both limitations, a person could be taxed up to 35% on the amount that exceeds both exemptions.
The easiest way that a person can take advantage of the annual tax exemption "is to give cash or other assets each year to each of as many individuals as you want." Another option that a taxpayer might want to use is to place the the annual amount in a Section 529 education savings plan. Under this option, a taxpayer can establish several different accounts for several different people. There is a benefit to this action. Any money placed within the accounts can appreciate and be withdrawn tax-free on the assumption that it is withdrawn for an educational puropse.
See Deborah L. Jacobs, IRS Raises Yearly Limit For Tax-Free Gifts, Forbes, Oct. 18, 2012.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.