Is Gift Tax Due Immediately Upon Making or Receiving a Gift?

For 2019, the annual gift tax exclusion set by the I.R.S. is $15,000 per person making the gift, and per recipient.  Married couples can gift double that amount per recipient, up to $30,000 annually. Gifts can be made to an unlimited number of people per year and still be eligible for the gift tax exclusion. This means that for gifts made in 2019, the first $15,000 gifted to an individual will not incur any gift tax. But many people ask, for gifts greater than $15,000 (or $30,000 if gifted from a married couple), will the person making the gift or the recipient of the gift have to pay a gift tax?

Mechanics of the Federal Gift Tax

If you receive a gift from another person over the $15,000 annual exclusion, you are not required to pay a Federal gift tax. Instead, the person making the gift will be required to file a gift tax return (Form 709). This gift tax return will eat away at the Federal estate tax exemption of the individual making the gift, reducing their exemption available by the amount gifted over the $15,000. For individuals who may pass away with relatively little wealth, this may have no negative effect on their estate tax. But for individuals of high net worth, it is important to consider the gifts made over a lifetime to understand the available exemption amount for estate planning. The I.R.S. will review all Form 709s filed during a lifetime to calculate the eligible Federal exemption available upon a person’s death.

Avoiding Federal Estate Tax

If you’ve made many large gifts during your lifetime and believe you may be subject to the Federal estate tax upon your passing, then it is important to implement estate tax planning strategies to reduce your exposure to the estate tax. There are many options available to reduce the potential estate tax, including the creation of irrevocable life insurance trusts (ILITs), creating tax shelter trusts (also known as “A B Trusts”), lifetime gifting under the annual exclusion amount, and charitable bequests. These strategies, among others, can reduce the amount paid to the I.R.S. and thus provide a larger bequest to your family upon your passing.

Comprehensive Estate Planning

If you have concerns about the gift tax or estate tax and have no comprehensive estate planning, then it is important to speak with an experienced estate planning attorney such as the estate planning attorneys at Johnston Tomei Lenczycki & Goldberg LLC. We utilize trusts (including lifetime revocable trusts, ILITS, special needs trusts, and irrevocable trusts), wills, powers of attorney for property and healthcare, living wills, HIPAA authorizations, deeds in trust, land trusts, and transfer on death instruments to ensure that your plan reduces your tax liability, directs your assets to your intended beneficiaries, and names the people you wish to act on your behalf if you are unable to act. We will review your finances, family status, real estate holdings, and prior planning to prepare a plan that fits your needs.

Call the Libertyville Estate Planning Attorneys at JTLG LLC Today

If you need an estate plan, whether it be a simple will or anything up to complicated estate tax planning with trusts, we estate planning lawyers at JTLG LLC can create your documents. We draft estate plans on a flat-fee basis with upfront pricing. We provide a no charge initial consultation so you can meet with your estate planning attorney and decide which plan is best for your situation. We will develop a thorough understanding of your family, finances, and wishes. Upon drafting your documents, we provide the opportunity for you to review your documents and determine whether they are suitable. We strive to customize your documents so they fit exactly your needs and goals. If you need estate planning, do not hesitate to reach out to us today at (847)-549-0600 to speak with our estate planning attorney.