Even better the gift of currency, cash, dead presidents, greenbacks….well you get it.
Investors want to know how they can pass money to their children and heirs and avoid the dreaded Gift Tax. Well, you can. It is relatively simple to do too.
Let’s first discuss how the gift tax exclusion works.
The gift tax exclusion allows anyone to give away as much as $13,000 per year to anyone, and to as many people as you wish. So if you have two children and four grandchildren, you can give each one a $13,000 gift. This allows you to reduce your estate and donate money to those individuals you care about. Keep in mind that these gifts are not deducible, unless they are going to a charitable organization and you itemize your deductions.
There are a couple of ways that you can legally exceed the $13,000 gift tax limit and not incur the gift tax:
1. Pay unlimited medical expenses directly to the doctor or hospital
2. Pay unlimited tuition expenses directly to the educational institution
The key to both these exceptions in the word directly. Make sure that nice check is written to the institution.
So if your rich grandmother gives her grandkids $13,000 each, and then pays a $50,000 to Harvard for the tuition of her oldest grandchild, none of those gifts exceed the $13,000 annual exclusion. You should Also consider being real nice to her in the future! Do you want to reduce your estate and give assets to others? Write to me at firstname.lastname@example.org, or call me at (859) 225-2596.