Gift It Or Will It
- September 7, 2015
- Donna Hines
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The Annual Exclusion Amount exempt from gift taxes is currently $14,000 . That means while you are alive you can give money or property up to $14,000 in value to as many people as you want during each calendar year without paying any gift tax. You don’t even have to file a gift tax return. The only stipulation is the recipient gets the gift now and has the right to take the gift and do with it as they please. You can gift to anyone. They do not have to be a relative. Tax free to you and the person/persons you gift. And, no paperwork.
Over the years many of us have accumulated “valuables”, Cars, Artworks, Jewelry, Silver, Antiques, and various other Collections. If your intention is to “will” these treasures (or money) to certain individuals these bequests more than likely will have to go through probate and there could be estate taxes as well as inheritance taxes to the beneficiaries. Also there will be a delay before these assets can be transfer to your beneficiaries. Inventory has to be taken, debt and taxes must be paid before beneficiaries received their inheritance.
Giving away money or property while you are alive helps lower your probate costs as well as estate taxes. The higher the monetary values of the property that goes through probate the higher the expenses and possible estate taxes. If the beneficiary is not a close relative they may have to pay an inheritance tax.
For example Bud has a valuable guitar his good friend loves. Bud wants his good friend to have this guitar at some point. The market value of the guitar is $12,000. If Bud gifts the guitar collection to his friend while he (Bud) is alive there is no tax to pay and no paperwork to generate. If Bud wills the guitar there could be estate taxes as well as inheritance tax. Currently in Maryland (10% inheritance tax) where Bud lives his friend would have to pay a $1200 inheritance tax on the guitar. Donna has a jewelry collection value at $100,000. She can gift 10 different people $10,000 worth of jewelry in one year. No taxes. No paperwork. If Donna wills the jewelry to her 10 girlfriends the jewelry goes through probate where there may be estate taxes on the jewelry and each of the 10 girlfriends will have to pay $1000 each in inheritance tax.
In conclusion, we all know we can’t take it with us. Think about gifting it while you are alive and see the joy your gift brings.