Raleigh, North Carolina (PressExposure) March 11, 2009 -- Ensuring Financial Stability of Future Generations
Gift Giving can Help Family and Friends Now, Save on Taxes Later
Preserving multigenerational wealth for loved ones is a common goal among most Americans, but recent economic turmoil has people concerned about how best to make this happen. Dale Merritt, wealth strategist for Banyan Rock & Talent, a Raleigh-based insurance and financial service provider, believes that seniors exercising tax-free gift giving can improve the entire family's financial stability while reducing future tax liabilities.
Many seniors with investments have experienced reductions in net worth over the past 12 months. Some are looking for alternatives that can extend the value of their remaining assets. Tax-free gift giving is one way to provide for immediate and longer-term financial stability of friends and family.
"If used to pay down a mortgage or to pay off other consumer debt, monies distributed today, which would be subject to estate and inheritance taxes later, can extend the value and usefulness of multigenerational wealth," says Merritt. "When doing so, people do need to be aware of the associated gift tax rules set forth by the government."
Individuals are allowed to give a gift of money or property to another person up to $13,000 without having to file a report to the government. If a person's spouse joins in giving the gift, the amount increases to $26,000. A person can give a gift to as many people as they want and avoid the gift tax as long as the amount is less than the annual limit established by the government.
If the gift amount is more than $13,000, then the donor will have to report the gift to the Internal Revenue Service. Although reporting is required, taxes may not need to be paid. The government allows an individual to give up to $1 million in gifts that exceed the annual limit in their lifetime before they have to start paying taxes. Additional gift tax information is available at [http://www.irs..gov].
An example of gift tax rules in action would be: if an individual gave $25,000 to each of their four children in a given year, they would need to report the transactions, but not be required to pay a gift tax. The person would use up $48,000 of their $1 million lifetime tax-free limit (four times the $12,000 that exceeds the $13,000 per-person annual limit for 2009).
Some exceptions do not count toward the annual limit on gift tax. They include: â¢ Tuition or medical expenses that you pay directly to an educational or medical institution or health care provider for another person's benefit â¢ Gifts to a spouse â¢ Gifts to a political organization for its use â¢ Gifts to charities