Gifting Smartly

Gifting can be a very rewarding activity;  however, it involves much more than simply writing a check.  Here are a few of the basics. 

Annual Exclusion Amount:  For 2011, the maximum annual exclusion amount is $13,000 per person, and the number of recipients is unlimited.  If your spouse “joins” in the gift, the maximum increases to $26,000.  

So…if you have five children, you, as an individual, may make $65,000 worth of annual exclusion gifts that do not trigger the federal gift tax.  That increases to $130,000 if your spouse joins in the gift. 

Lifetime Federal Gift Tax Exclusion Amount: $5 million is the magic number in 2011!  Please note that any portion of the gift tax exclusion you use will reduce, dollar-for-dollar, your federal estate exclusion available at death.  By the way, the maximum federal gift tax rate is 35 percent for 2011.  

Charitable Gifting:  You may want or need to do more than simply writing a check to loved ones or favorite charities.  Consider charitable trusts.  Depending on which type you choose (charitable remainder or charitable lead), they offer the potential benefits of reducing income taxes, reducing or eliminating the federal estate tax, providing income to specified beneficiaries, teaching social responsibility to family members, and transferring wealth to loved ones. 

Other Creative Gifting Techniques:  For some families, a grantor retained annuity trust, also known as a GRAT, works well.  This trust arrangement allows you to pass assets that you believe will increase in value to family members…at “discounted” values.  For other families, a limited liability company (LLC) or family limited partnership can be used to reduce your estate for transfer tax purposes. 

If gifting is on your mind, discuss your estate planning objectives and concerns with your wealth manager as well as your tax and legal advisors. 

Remember…Greater Madison has a wealth of first-rate advisors willing and able to assist!


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