Austin Probate Lawyers

Lifetime Gifts – Taxes and Restrictions

Though there are several ways to work around the high federal estate tax, few are as intuitive as gifting. The rationale is simple – if you intend to leave property to a person anyway, why not just pass it on during your lifetime as a gift and avoid having to pay estate taxes on it after your death?

The bad news is that gifts, like virtually all other financial or property assets, are subject to restrictions (and possibly taxation) under federal law. Luckily, the basic rules on gifts are fairly simple:

Each person is allowed a $12,000 annual gift tax exemption; that is, the first $12,000 (in value) of gifts that you make every year to any one person is excluded from the gift tax. Any gifts made in excess of that $12,000 will be taxable.

Over an entire lifetime, every person is allowed a $1 million total gift tax exemption on top of the annual exclusion. This means that, unless you gift more than $1 million over your life in addition to the $12,000 you are allowed per person, per year, you won’t have to pay gift tax. Unfortunately, this $1 million lifetime exemption counts against your standard estate tax exemption, so it is usually best to stick close to the annual exclusion limit.

Gifts which pay for medical or education expenses are exempt from gift tax, so long as they are made directly to the appropriate medical or educational institution.

For more information on the gift tax and how it may affect your estate planning, contact experienced Austin probate lawyers Slater & Kennon, LLP at 512-472-2431 today. Centrally located in the Arboretum area of north Austin, the Slater & Kennon law firm represents clients in Travis County, Bastrop County, Burnet County, Williamson County, and Hays County, including the cities of Austin, San Marcos, Bastrop, Burnet, and Georgetown.