Domestic Diversions

Holiday Gift Ideas

Yesterday’s Wall Street Journalarticle by Kaja Whitehouse advises that when it comes to financial gifts, there are strict rules governing how much you can give and when. People who don’t follow the rules risk facing a tax bill that can run as high as 55% upon death. Taxes are imposed on big gifts to anyone besides charity, to prevent people from passing ther wealth to lower-income family members and lessening what is ultimately paid to the government.

Regardless of these rules, you can still make substantial gifts each year, especially if you take advantage of certain loopholes within the gifting rules. These loopholes let you give more, and in ways that can reduce your taxes.

This is especially important for people with substantial estates who are exposed to estate taxes. Giving away assets on a regular basis is the “easiest, simplest, most painless” strategy to lower this tax, which is imposed on deceased people’s estates…This year, you can give away as much as $11,000 to as many people as you want without informing the IRS…

By investing in a 529 plan, you can give away up to $55,000 in one shot–$110,000, for a married couple filing jointly. Once you invest the $55,000, however, you’ve used up your ability to give that person a gift for five years…

Another bonus of the 529 plan is that it lets the donor retain control of the money. Normally, when you give money or property away, its gone. But with a 529 plan, you remain in charge, even though the money isn’t counted as part of your estate.


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