There are numerous ways to avoid gift and estate taxes. Most of us will never have to worry about those issues. However, gifting can still run many of us into tax issues that we should all be aware of as we plan out our finances.
The government allows each individual to give up to $14000 to a child, grandchild, or any other person free of gift tax each year. So if you happen to be married, you and your spouse can each give $14000 to the same person, effectively doubling the amount to $28000 to that person.
This does not apply just to cash, but to stock, property etc. So beware if you happen to decide to “gift” that ATT stock or that property up north to your daughter at Christmas.
You will not necessarily owe tax on the amount of the gift over $14000 that you give someone during the year, but it will require you to file a gift return. Larger gifts will reduce your $5.34 million estate tax exemption.
So the first strategy is to make sure gifts are less than $14000, unless you don’t mind doing, and/or paying for someone else to prepare, a gift tax return.