189 Wells Avenue, Suite 200
Newton, Massachusetts 02459
Telephone: 617.332.0090
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Joseph Law Office

Attorney Scott A. Joseph

TAKE ADVANTAGE OF ANNUAL GIFTING LAWS IN 2015

By Scott A. Joseph, December 3, 2015

DO NOT FORGET TO TAKE ADVANTAGE OF TAX AND GIFTING LAWS BEFORE THE END OF 2015

Before the year is over, take advantage of the tax break which allows you to make gifts of up to $14,000 to an unlimited number of recipients – free of transfer tax each calendar year. The tax-free gifting amount doubles to $28,000 apiece if you are married. Taking advantage of the tax-free annual gift exclusion is an excellent way to reduce the amount of your estate, and to avoid death taxes. Every calendar year that passes without making tax-free annual exclusion gifts represents a lost opportunity. You must make the gift before the end of December or lose it. A common strategy involves making gifts before the end of December this year, then duplicating the gifts again in January to effectively double the size of your tax-free gifts.

Even though the Federal unified credit for estates and gifts is now over $5 million, given the turbulent history of this area of the law, it is strongly recommended that individuals undertake an annual gifting program to reduce their risk of potential death tax exposure. Annual gifting can create a significant tax break. For example, a taxpayer and spouse with two married children and three grandchildren can make annual tax-free gifts of $196,000 (seven recipients of $28,000 apiece). Assuming a 40 percent Federal estate tax rate will apply at the death of the survivor of the taxpayer and spouse, this gifting strategy can lead to future tax savings of over $78,000 per year.

Note that if you make gifts in excess of the annual exclusion amounts, you will reduce the amount of your lifetime unified estate and gift tax exemption. However, the sooner you use it, the more income and appreciation that can pass tax-free to your family in the future.

If you fail to take advantage of annual tax-free exclusion gifting, those tax savings will disappear and all of the potentially saved money will be paid to the IRS upon your death – and not to your family.

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