Last week we discussed the estate tax, and learned that individuals can shield $12.6 million dollars of their estate from the federal tax at their death. This is good news for the majority of folks whose estate totals far less than $12 million. However, some people prefer to give away portions of their estate to family members and loved ones during their lifetime. Are there any potential taxes applicable if one chooses to do so?
The answer is yes, there is a gift tax, but the good news is that few people will owe one, primarily due to two exclusions that can be used.
First, there is an annual exemption. In 2022, you can give up to $16,000 to different recipients this year without having to file a gift tax return. This is a per donor exemption, so a married couple could gift $32,000 in 2022 without triggering a need to file a gift tax return.
Second, on top of this annual exclusion, there is also a lifetime exemption from the estate tax when you die. You can use some of that estate tax exemption while you are alive making gifts to a person over the annual exclusion. Any gift amount over the annual exclusion then falls over into your estate tax exemption and whittles that down. But, you do have to file a gift tax return and do that properly. So, if you are contemplating making gifts over the annual exclusion, you should certainly consult with your tax advisor and make sure all required filings are made.
Finally, there are some typical exempt gifts, including gifts made to your spouse, gifts to directly pay for medical expenses or education expenses, or charitable gifts.
The reality is that most people won't have any gift tax issues during their lifetime. But, just because you don't have to worry about gift taxes, does not mean that you don't need to do any planning and don't need to work with an experienced estate planning attorney. Taxes aside, there are important decisions to make and plans to have well documented to ensure that your wishes are known and that you and your family are protected in the event of your incapacitation or death.
If you want more information on estate planning in Georgia, click here to request out free Guide to Estate Planning in Georgia, no strings attached.
From wherever you are in Georgia, if you have questions or need to consult with an experienced estate planner, give us a call at (678) 344-5342. We work with families and individuals across the state, and it would be our honor to assist you.
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