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The Benefits of Making Annual Exclusion Gifts Before Year End
The 2017 gift tax annual exclusion permits you to gift up to $14,000 per beneficiary tax-free without using any of your lifetime gift and estate tax exemption.If you and your spouse both want to make a joint gift to the same recipient within the same calendar year, the gift limit doubles to $28,000 per beneficiary (note that even if the gift comes from only one spouse you can elect to treat that gift as a joint gift and enjoy the benefit of the double gift tax annual exclusion.
For those looking to reduce estate tax exposure, a gift of property you expect to appreciate can be especially valuable to both you and the recipient. The reason being is you can avoid the gift and estate taxes you would experience had you waited to gift the property later down the road. Planning ahead to take advantage of these exclusions for multiple years can be a significant estate planning strategy.
The exclusion will increase to $15,000 per year in 2018. However, this is not a reason to delay making a gift this year. The 2017 exclusion does not carry forward and is lost after December 31, 2017. It is also important to be aware that gifts paid directly to an education institution for tuition, directly to a medical facility for medical care, to a citizen spouse, and to a qualified charity do not count towards your use of the annual exclusion and are not subject to gift tax.
Amidst a potential changing environment in Congress with pending tax reform, it is important to keep an eye on where changes are occurring. Both the U.S. House of Representatives and the U.S. Senate tax reform bills have shed light on the potential future of the estate tax. However, the significance and likelihood of estate tax reform remain to be seen.
With the deadline approaching for the 2017 exclusion and the current benefits that can be reaped by taxpayers looking to reduce their estate tax, it may still be a smart tax move to take advantage of the exclusion this year. Please contact your WK advisor to discuss whether such a strategy makes sense in your specific situation.