Individuals can generally receive up to $13,000 a year as a gift without getting hit by a federal gift tax. In 2013, as a result of cumulative indexing, this amount is projected to increase to $14,000 per person.
Any victory, large or small, is worth celebrating. So when it was projected that the annual gift exclusion will increase from the current $13,000 to $14,000 per year per person in 2013, many people are thrilled to see this change in the tax code.
This increase has been a small victory heralded by the financial press, included in a recent CBS MoneyWatch article titled “Gift-tax limits to rise in 2013.”
Now, the extra $1,000 may not sound like much if you haven’t been making full use of your gift limits. Nevertheless, when it comes to tax advantage wealth transfers, every little bit helps.
In fact, annual giving to loved ones is a time-honored tradition and strategy. Every portion of your estate given removes that much from coming under the estate tax scythe at your death. Remember: beginning in 2013 you can transfer $14,000 per year per person, to as many persons as you see fit, without reducing your lifetime exclusion (currently $5.12 million, but we’ll see what comes of that in 2013).
In addition, these gifts don’t count as charitable gifts either, which are without limit and can provide significant tax deductions when done correctly. If you are looking for even more ways to maximize your wealth transfers through gifting, then consult the original article. For example, two very specific and useful suggestions are to make gifts to cover educational costs (i.e., tuition) or medical costs.
Gifting is a great way to transfer wealth to future generations, and any small victory (even a $1,000 increase in the annual gift exclusion) is worthy of attention and consideration. You can learn more about this topic as well as other strategies on our website under the tab entitled: estate planning in Williamsburg, Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: CBS MoneyWatch (October 10, 2012) “Gift-tax limits to rise in 2013”