For many of us, giving to the ones we love and the causes we support is part of living a complete and fulfilling financial life. Unfortunately, choosing to give your resources to others can get complicated if you do not plan your gifting carefully.
The federal government maintains laws that regulate how much one party can give to another person or party, to help avoid unlimited, potentially unethical “gifting” that circumvents taxation. While you can enjoy giving tax-free up to certain thresholds, it is important to understand these limitations to make the most of your resources and avoid unnecessary taxes.
If you have concerns about the condition of your estate and need to put it in order, use strong legal resources and guidance to protect your rights and best interests. Without taking time to understand the opportunities and limitations you face, you may miss out on important saving and giving.
Gift tax exemptions
Giving money to a person or organization is an excellent use of your assets, and there are many ways to give without incurring taxes. These include:
- Charitable contributions to legitimate organizations and causes
- Giving to qualified political parties and organizations
- Giving directly to your spouse
- Paying medical or tuition expenses for someone else
- Gifts to another individual
You can exercise your freedom to give in any of these areas, although they each come with some restrictions. These restrictions fluctuate from year to year. It is important to research the most up-to-date regulations before you make a large financial contribution to a cause or give an individual a large sum of money or valuable property.
For instance, you are free to give a certain amount of money or valuable property to another individual each calendar year. As of 2019, the personal gifting threshold is $15,000 per person. This means that you may give another individual a total of $15,000 within the calendar year of 2019 without incurring gift tax.
However, gift tax may apply if your exceed the $15,000 per-person threshold. This might happen if you choose to reward a family member for graduating from college by gifting them $15,000 in the summer months, and then give them another $1,000 during the holiday season at the end of the year.
Protect your estate for the ones you love and support
Estate planning focuses a great deal on minimizing the costs of transferring property between family members and loved ones. As you review your estate plan and will, it is wise to make sure that you have a strong grasp on the expenses that drain your estate and the ways this may impact your wishes over time. With careful planning and a strong legal strategy, you can keep you estate secure and ensure that your wishes remain respected when the time comes.
