Lifetime Gifts

Most people are aware that they can make gifts of a "present" interest in an asset, including cash, each calendar year in the amount of $14,0003 per recipient (donee). If you are married, your spouse can join with you in making such a gift whereby the amount of the gift can be increased to $28,000. These annual exclusion gifts will not reduce the amount of your unified credit available for purposes of making future gifts or determining the amount of estate tax payable at your death.

There are many benefits of making gifts in excess of the annual exclusion amount of $14,000 per donee. For example, the appreciation and earnings that occur with respect to the gift, after the gift is completed, will escape estate taxation at your death.
Furthermore, the effective rate of tax on gifts which exceed the lifetime applicable credit amount will be less than the effective rate of the estate tax that would otherwise be payable on the assets gifted if you live for a period of more than three years after making the gifts creating the federal gift tax liability.

Gifts can be made to a spouse who is a U.S. Citizen on a gift tax-free basis of an unlimited amount of assets. If the donee spouse is not a U.S. Citizen, the amount that can be gifted to such spouse gift tax-free during calendar year 2015 is $147,000.

Remember that a gift will not be considered to have occurred for federal gift tax purposes unless you completely relinquish dominion and control over the asset and cause it to be delivered to the donee or a trust created for the benefit of the donee. If you make a gift in the form of a check, it should be cashed by the donee in time for the underlying funds in your account to be shifted to the donee's account prior to the end of the calendar year in which the gift is made.

One method of making a gift while retaining some income stream from the asset gifted is utilizing one of three types of non-charitable split interest trusts; the grantor- retained income trust, the grantor-retained annuity trust or the grantor- retained unitrust. These trusts allow you to make a gift at a reduced value because the amount of the gift is based on the total value of the asset less the value of the income interest you retain in the trust.

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