Gifting: A Win-Win Proposition

You can make annual gifts of up to $14,000 ($28,000 per married couple) to as many people as you wish without incurring federal gift taxes. For tax year 2013, the annual exclusion for gifts was increased to $14,000, up from $13,000 for 2012.

A wealth-transfer technique you can use to reduce your taxable estate and keep more of your assets for your heirs is with gifting. You can make annual gifts of up to $14,000 ($28,000 per married couple) to as many people as you wish without incurring federal gift taxes.

An example: A married couple with three children could reduce their estate by $84,000 each year if $28,000 were given to each of their children.

Gifting can be used in a number of unique ways. You can use annual gifts to help build a college fund for a child, grandchild, relative, or even a friend -- by contributing to a 529 plan account, a Coverdell Education Savings Account, or a UGMA/UGTA account. In fact, 529 plans have special rules that allow you to make five years' worth of contributions in one year without incurring any gift taxes -- that's $70,000 for individuals and $140,000 for married couples!

Gifts can also be used to build wealth for future generations as well as help a child, relative, or friend fund a down payment on a home, buy a car, or start a business. Your financial advisor can help you determine how annual gifts might fit into your overall financial plan.

 

January 2012 — This column is provided through the Financial Planning Association, the membership organization for the financial planning community, and is brought to you by Robert J. Pyle, CFP®, CFA, a local member of FPA.

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Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

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