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Year End Estate Planning Tips – Make Annual Exclusion Gifts

At this time of the year we get calls from clients who are ready to make their year end “estate planning” (as opposed to holiday) gifts to their loved ones. This will usually include gifts of cash, stocks, bonds, portions of real estate, or forgiving debt on a family loan in an amount that do not exceed the annual gift tax exclusion. What is the purpose of these “estate planning” gifts? To reduce the value of the gift giver’s taxable estate.

This year the annual gift tax exclusion is $13,000 per person and in 2010 the exclusion will remain the same. What this means is that you can gift up to $13,000 to as many individuals as you choose before December 31, 2009, and an additional $13,000 on or after January 1, 2010, and neither you nor the recipients of the gifts will have to file a gift tax return (IRS Form 709). In other words, transfers of property valued at or under the annual gift tax exclusion are not really considered gifts at all.

Married couples can take double advantage of the annual exclusion and gift $26,000 on or before December 31, 2009, and then another $26,000 on or after January 1, 2010. But note that in some situations even if a couple limits their gift to the annual exclusion amount, they may still need to file a gift tax return to report any “split gifts” – they will need to consult with their accountant to be sure. And if the couple does need to file a gift tax return, then it will be due on April 15 of the year following the year in which the gift was made.