Taxes are controversial, and though most people accept that tax revenue is necessary to support our societal infrastructure, you probably don’t want to be taxed at every turn, and you probably don’t want to be taxed twice on the same income.
With this in mind let’s take a look at the federal gift tax. You may not realize that some gifts that you give to your loved ones are taxable. The reason why you don’t get a bunch of IRS bills in your mailbox around the holiday season is because there is a gift tax exemption.
This exemption is unified with the estate tax exclusion. So when you combine the value of all the gifts that you gave during your life using this unified exclusion with the value of your estate you are going to come up with a number. If this amount exceeds the unified gift/estate tax exclusion amount, the amount in excess of the exclusion is taxable.
So, let’s say that you take stock of your assets, find that you have more than you need, and would like to give a significant gift to each of your children. Even though these assets are what you have left over after paying taxes, these assets may be taxed yet again as gifts. So, you may want to consider the tax implications before just writing out checks.
Indeed, there is more to generosity than meets the eye given the realities of the tax code. If you are interested in making substantial gifts to loved ones in a way that protects your family, contact an experienced Ashland KY estate planning lawyer.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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