Should I donate my property to avoid gift and inheritance taxes?


Q. I have learned that if you give a “gift” below the taxable amount, there will be no tax. If this is correct, can I give “all” of my assets such as our house, my IRA, all of my CDs, and my checking account to my son as a gift so he can avoid all taxes. It will be after my death. Your advice is appreciated.

– Planning

A. Looks like you are referring to federal donation tax.

Here is how it works.

You can gift $ 15,000 per person per year without gift tax, said Yale Hauptman, estate planning attorney at Hauptman and Hauptman in Livingston.

If you give more than that to the same person, you must file a donation tax return, Form 709, he said.

“In this case, you have two options: either pay tax on the excess over $ 15,000 – the current rate is 40% – or use part of your lifetime exclusion which is now $ 11.58 million. dollars, ”Hauptman said. “This is the amount in addition to the annual exclusion that you can transfer during your lifetime or upon your death free of gift or inheritance tax. “

If you are married, it is $ 23.16 million that you and your spouse can transfer tax-free.

New Jersey no longer has inheritance tax.

Hauptman said that at the current amount of the exemption, very few Americans have to worry about tinheritance or gift tax.

Your idea of ​​giving your son everything is extreme and has other risks you may not be aware of it.

First, legally, he would own everything. You would then be financially dependent on him for anything that your income does not cover, he said.

“You might understand that he will take care of you, but if he changes his mind there is not much you can do about it,” he said. “If he dies, divorces or goes bankrupt, the money could also be lost.”

There are other potential negative income and capital gains implications on the transfer, Hauptman said.

There are better ways to limit taxes without that kind of risk through the use of trusts, Hauptman said, but first make sure you really have a tax problem. Then, if you want to offer your son money, use the annual exclusion. If you and your son are both married, you could give up to $ 60,000 each year from you and your spouse to your son and his spouse, he said.

“My advice is to speak to an estate planning lawyer or, if you are near or at retirement age, a senior lawyer who can give you the advantages and disadvantages of your particular situation.” , did he declare.

Email your questions to [email protected].

Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for‘s weekly electronic newsletter.

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