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Understanding Gift Taxes

As someone establishing an estate plan, you may want to bequeath cash gifts to certain friends or relatives. The laws involving both estate and gift taxes are thought to be some of the most complicated in the Internal Revenue Code; therefore, it's a good idea to discuss the tax implications of making cash gifts to your loved ones with a qualified lawyer. Below we have included some basic information about gift taxes, but for more in-depth information, we suggest that you contact a Houston estate planning attorney from our firm directly.

When someone makes a cash gift to another person, the donor is generally responsible for paying the gift tax. However, under special arrangements the donee may agree to pay the tax instead. We suggest that you contact an attorney before making this type of arrangement.

What is considered a gift? According to the IRS, any transfer of money to an individual, either directly or indirectly where nothing is exchanged in return is considered a gift. The general rule is that any gift is a taxable gift; however, there are several exceptions to this rule and the following gifts are not considered taxable gifts by the IRS:

  • Gifts that do not meet the annual exclusion for the calendar year
  • Tuition
  • Medical expenses
  • Gifts to your spouse
  • Gifts to a political organization
  • Gifts to qualifying charities

Making gifts or leaving your estate to your heirs does not usually affect your federal income tax. Other than charitable contributions, you cannot deduct the value of gifts that you make. If you are not sure whether the gift tax or estate tax applies to your situation, we urge you to contact Shepherd & Associates.

As of January 1, 2013, the annual exclusion limit for gifts was set at $14,000, which applies to each donee. This means that you could give each of your three children $14,000, and the annual exclusion would apply to each gift. If you and your spouse want to give property away that you own together, then together you can give $28,000 on or after January 1, 2013.

Shepherd & Associates - Houston Estate Planning Lawyer
Located at 14090 Southwest Freeway, Suite 300
Sugar Land, TX 77478
Phone: (713) 993-7791

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

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