Gift Planning
Reporting a Gift
Gift planning can be an important part of estate planning. Developing an estate plan for your assets requires professional assistance, but knowing the basic guidelines can help you begin to estimate your potential estate and start thinking about property transfers that may reduce or avoid the estate tax.
Relatively small gifts can completely avoid gift tax because of the annual gift tax exclusion, which for 2007 is $12,000 per donee. Gifts to a spouse and certain gifts to pay educational or medical expenses also are not subject to the gift tax.
Gift tax generally does not have to be paid even on very substantial taxable gifts because the tax is offset by a tax credit that effectively exempts up to $1 million of lifetime taxable gifts from the tax.
The estate tax is in a state of legislative flux. Under the 2001 Economic Growth and Tax Relief Reconciliation Act, the estate tax exemption (and corresponding tax credit) is slated to be increased and the top tax rate decreased until 2009 prior to repeal of the estate tax in 2010, a repeal scheduled for just that one year.
