05 Oct Gift tax consequences for you and your heirs
Q. I know I can give up to $13,000 to each of my two children but what happens at tax time? I’m 62, a widower and retired and my boys are 30 and 27. Does reporting the gift do anything for me? Must they declare and pay tax?
A. Thank you for your question, but some of your assumptions are off by a few years.
Let’s start with the big picture, then move on the annual gifting amounts and what it all means for your taxes, and for the taxes of your children.
In 2017, the federal estate and gift tax exemption is $5.49 million per person, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.
“This means that an individual can leave and/or gift a total of $5.49 million to their heirs without paying federal estate or gift tax, she said. “This figure is scheduled to rise with inflation in 2018.”
Then there’s New Jersey.
New Jersey has an estate exemption of $2 million in 2017. The New Jersey estate tax is scheduled to be repealed entirely in 2018, Whitenack said, and New Jersey does not impose a gift tax.
“There is a federal annual gift tax exclusion amount that doesn’t count toward the lifetime gift exemption,” she said. “The annual gift tax exclusion amount has been $14,000 since 2013.”
This means that an individual can give away $14,000 to as many individuals as he or she would like.
“No gift tax returns need to be filed if the annual gifts total $14,000 or less to each individual and no gift taxes need to be paid on such gifts,” Whitenack said.
If you’re not sure of the current law and how it would impact you, we recommend you speak to an estate planning attorney or a financial advisor.
Email your questions to moc.p1566160681leHye1566160681noMJN1566160681@ksA1566160681.
This post was first published in October 2017.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.