How to Avoid Taxes When Gifting a Beneficiary
When you build enough wealth in your life, there is a chance that you will want to give back. However, when you decide to help others, Uncle Sam can’t help but try to grab a piece of your gift. However, there are a number of ways that you can avoid the gift tax when helping others.
What is the Gift Tax?
The Gift Tax is a tax that you will have to pay if you transfer something of value from one person to another without receiving anything or something less than the full value of the gift. However, there are some exemptions to the Gift Tax code that allows you to give more to your beneficiaries.
Top Strategies to Gift Beneficiaries without Paying Taxes
There are a number of strategies that you can employ to ensure to avoid paying the gift tax. Here are four strategies that you can use today.
1) Keep Gifts Within the Annual Limit But Gift to Multiple People
According to the Gift Tax code, you can give an individual up to $15,000 a year without paying the gift tax. Therefore, if you want to gift money or something of value to a family, then you are better off gifting up to $15,000 to each individual member of the family. For instance, if you want to give money to your daughter, then you can write a $15,000 check to her as well as her husband and her three children.
2) Gift Your Stock
If you want to contribute a large gift, you have the option to gift stock instead of cash. Since a stock’s value is not determined until the stock is sold, it is exempt from the gift tax. This also allows the stock to continue to appreciate at price over the years. Gifting stock is an excellent way to not only avoid the gift tax but is also a great way to avoid the inheritance tax.
3) Pay Medical Bills or Tuition Directly
If you want to pay someone medical bills or tuition, you can do so by directly paying the bill off yourself. The amount that you pay will not be subject to the gift tax and you can pay as much as want.
4) Spread the Gift Out Through Multiple Years
Another way to work around the $15,000 a year limit to an individual is to spread the gift out over multiple years. For instance, instead of giving your child $100,000 in one year, you can break it the $100,000 gift over seven years while remaining under the $100,000 limit.
Give More to Your Beneficiaries and Less to Uncle Sam
You worked hard to build your wealth. Don’t let Uncle Sam come between you and your beneficiaries. Be sure to discuss the best ways to gift your beneficiary with a wealth manager today.
