Basic Gifting Concepts To Avoid Estate and Gift Tax

Gifting may only be necessary for people who have large estates. With the estate tax exemption for deaths occurring in 2016 at $5.45 million, it may not be appropriate for most Louisianians to make gifts annually.

However, if an individual has or will have an estate exceeding these thresholds, it may make sense to do some gifting if one of the primary objectives is to preserve the estate for the family and minimize or avoid estate tax at death.

Individuals can donate up to $14,000 annually to as many people as they want to without incurring gift and estate tax consequences. If an annual gift exceeds this annual exclusion amount, then typically, no tax is due, but the donor will begin using his or her $5.45 million gift and estate tax exemption.

A person can donate cash, stock, property, an interest in a business, or any other asset having value. People should be careful, however, when they donate appreciated assets because it may result in extra capital gains tax when the asset is later sold or disposed of. When appreciated assets are donated, the done/recipient receives the assets at a "carry-over" basis. But when an individual inherits appreciated assets, the heir/recipient enjoys a "step-up" in basis.

Gifts can be either outright or in trust. Gifts are often made in trust when the donor does not want the donee to have complete control of the gifted asset. But if you donate in trust, you have to make sure the gift in trust meets the requirements of the "present interest annual exclusion," so that the beneficiary of the trust has a "present interest" in the gift.

Gifting to avoid estate tax can be complicated. Rabalais Estate Planning, LLC, has attorneys and office locations all around south Louisiana, including Baton Rouge, Metairie, Lafayette, Mandeville, Lake Charles, and Houma. Our website is www.RabalaisEstatePlanning.com. Our phone number is 866-491-3884. You can also email me at paul@rabalaisestateplanning.com.