Gift Tax
Candlefocus EditorThe IRS allows a lifetime exemption on gifts that can be adjusted annually to keep up with inflation, and exclusion of certain gifts. Those gifts excluded are any given to your spouse who is a United States citizen, political organizations for use by the organization, medical and tuition-related expenses, and any gifts that are valued at less than the annual exclusion amount.
In order to avoid the gift tax, one can utilize two strategies. One strategy is gift splitting, which allows a married couple to double their gift tax exemption. This allows the married couple to give more money or property to others without incurring the gift tax. The other strategy is creating and giving a gift in trust. This trust, which usually has a trustee, allows for the donor to give money or property with the trust to pay for a specific item for an individual, such as a college tuition or other expenses, while still allowing the donor to maintain control over the asset.
The gift tax is commonly thought of as a burdensome tax on generous individuals, but in reality it is a way to limit extreme accumulation of wealth by a few individuals. By utilizing strategies such as gift splitting and giving a gift in trust, individuals can give large amounts to others without having to pay the gift tax. Despite attempts to avoid the gift tax, it is important to remember the gift tax exists, and the funds collected go towards benefits and services provided by a nation.