How Often Can You Gift in Estate Planning?
- When you are in the process of planning out your estate, you may wish to give money each year to a certain number of individuals. At time of publication, you may give up to $13,000 to another person if you are an individual or $26,000 to another person as a couple. You have the option of giving as much money to an unlimited number of people each year. As long as you keep the total to each person below this amount, you do not even have to report the amount to the IRS.
- When you give more than $13,000 or $26,000 per year to an individual, this overage counts towards your lifetime gift tax exemption. At the time of publication, you may give up to $5 million in gifts to others on top of the annual gift tax exemptions. For example, if you give a gift of $50,000 as an individual to another person, $37,000 will count towards your $5 million lifetime limit. Once that limit is reached, then you have to pay gift taxes.
- In the process of estate planning, you have to look at the size of your estate in relation to the gift and estate tax laws. If the total value of your estate is more than $5 million when you die, it will be charged estate taxes based on its value. Because of this, you may wish to give away some of your property to get under that estate tax exemption limit. By doing this, you can limit estate taxes and save your estate for your family.
- If you exceed the gift tax limits for the year and for your lifetime gift limit, you will have to start paying taxes on the value of your gifts. As of 2011, the gift tax rate is 35 percent. This means that you multiply the value of the gift by 35 percent and this is the amount of tax that you will have to pay to the Internal Revenue Service. Once you reach the limit, the tax bite can be substantial.
