Happy Sunday!

I hope you enjoyed last month’s theme – ILITs (irrevocable life insurance trusts). But, November is over, so it’s time for a new topic!

This month, since it’s a bit of a theme anyway, we’re going to talk about gifting.

Today I thought it might be nice to just dip our toes in the water and get comfortable with the high level rules around giving gifts.

Ready?

Here. We. Go!

First things first, there are two sets of gifting rules.

There are rules federally (think IRS).

And there are rules for WA state.

We’re going to start with WA state first, because this one’s easy to remember.

In Washington State there are no gifting rules.

You can give as much as you want to whomever you want at any time.

There are no forms to file, there are no boxes to check, there are no taxes to pay.

Simply give what you are going to give, and move on.

Easy, peasy.

When it comes to gifting from a federal tax perspective, things are a little more nuanced.

I think the easiest way to break it down is to just give you the three general rules around gifting.

1. You can give $17,000 per year to as many people as you want with no paperwork.

As long as your gift is under $17k (and this changes every year) it’s all good – there is nothing to do.

If you’re married you each get $17k/year to anyone you want.

2. Payments for school and/or medical treatment directly to the institution do not count toward the $17k annual gifting limit.

So, if you want to help someone pay for daycare, private school, or college, you can do that so long as you write the check to the institution – no limits and no reporting.

Same goes for medical care.

3. If you go over $17k in a year, you don’t have to pay tax, it just reduces what you can give down the road.

In addition to being able to give $17k in a year, you also have the ability to give $12.92M over the course of your life, without having to pay any tax.

If you give over $17k to an individual in a year, you don’t pay tax on the overage, it just reduces your lifetime giving amount.

For example, if you give me $117k this year (just an example!!!) for my awesomeness, there is no tax to be paid, but when you file your income taxes for this year you would include a gift tax return, not the $100k overage, and your lifetime giving amount would go from $12.92M to $12.82M.

That’s it for this week.

Just let that sink in.

Next week we’ll talk about why this might be a good idea and how to do it.

Have a great week!

Cheers,

Christopher Small
CMS Law Firm LLC

PS – don’t keep this estate planning stuff to yourself – you know it’s important and we LOVE referrals!

PPS – note for CLIENTS – our office will be CLOSED December 25-January 1. If you are planning on waiting until the end of the year to get started or get done, don’t wait too much longer!