Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Wednesday, March 31, 2010

Creative Gifts For Family and Friends in Need May Avoid Gift Tax Liability

PhilanthropyIn tough economic times, wealthy clients may wish to provide financial help to less-fortunate family and friends.  Unlike the the federal estate tax, however, the federal gift tax has not been temporarily repealed.

According to Deborah L. Jacobs, Five Tax-Free Gifts to Family, Forbes, March 26, 2010, the following five gifts are ways wealthy clients could carry out their generous intentions without incurring a gift tax bill from Uncle Sam:

  • Capitalize on Cash Gifts: The annual exclusion allows a donor to make gifts of $13,000 to an unlimited number of donees each year.   A donor could even give to minors by placing money in a custodial account that an adult other than the donor oversees.
  • Fund a Section 529 Education Account: This is another way to use the $13,000 annual exclusion. Money invested will grow tax free and can be withdrawn tax free if used for education.
  • Pay Tuition and Medical Expenses: Directly paying someone else's medical expenses or tuition is not a taxable gift and is excluded from the gift tax separately from the $13,000 annual exclusion.
  • Lend Money: Another way to use the $13,000 annual exclusion is lending money at favorable interest rates.  
  • Buy a House and allow loved ones to live in your property rent free:  It is unclear if this constitutes a gift, so steps such as keeping an at-will arrangement or making the rent-free inhabitants co-owners of the home may be beneficial in the long-run.


Gift Tax | Permalink

TrackBack URL for this entry:


Listed below are links to weblogs that reference Creative Gifts For Family and Friends in Need May Avoid Gift Tax Liability:


Post a comment