New $13,000 Annual Gift Tax Exclusion

The IRS recently announced that the annual gift tax exclusion amount will increase from $12,000 to $13,000 beginning Jan. 1, 2009.  This means that every individual can give away up to $13,000 per person, per year without having to file a gift tax return. For example, you could make a gift of $13,000 to each of your three children and to each of their spouses for a total of $78,000 per year (or two times that amount for married couples).  There is no limit to how many individuals you may make gifts to. This would allow you to quickly reduce the size of your estate if you were concerned that, upon your death, your estate would be large enough to have an estate tax liability.  

By making wise use of this annual gift tax exclusion, you can provide an inheritance to your family members much earlier than at your death and reduce potential estate tax liability in the process.  Of course, gifts must be completed (no take-backs allowed) if they are to qualify for this exclusion.  Furthermore, one must be careful when utilizing gifting strategies due to the potential negative consequences that they can have with regard to qualification for certain government benefits programs such as Medicaid.

To learn more, visit the IRS Website's news release on this topic.  Before you begin a gifting plan, be sure to consult with your tax professional and estate planning attorney to ensure that you have considered the different available estate planning alternatives.