As we near the end of the third quarter of 2014 I ask myself, where has the year gone? It seems it was just yesterday that I was indolently celebrating the New Year. Now, I have come to realize that we are coming into the last few months of 2014, and with that, the holiday season is impending. Fearing that I may be perceived as one of those people who begins their Christmas countdown months too early, I am reluctant to say that Christmas is in fact around the corner, and the time to begin shopping for gifts is uncomfortably near. In the spirit of this gift-giving discussion, I wish to remind those of you who are benevolently inclined or who are looking to transfer assets free of gift tax that in addition to budgeting for the latest and greatest toys and gadgets for your young children and grandchildren (toys and gadgets that we only dreamed of as kids), you must also budget for your annual exclusion gifts.
Internal Revenue Code section 2503(b) provides in relevant part:
In 2014, the $10,000 figure above, which is indexed for inflation, increased to $14,000. Thus, in 2014 taxpayers can gift up to $14,000 per donee, and married couples can gift twice this amount, or $28,000. This can be a useful tool to transfer value out of ones estate free of gift taxes. And, if a taxpayer has many donees to which he or she is prone to make gifts, the annual exclusion can be especially effective. So again, for those of you who are altruistically disposed, before you get caught up in the holiday cheer and before the year-end comes and goes, be sure to budget you annual exclusion gifts.
-Attorney Michael D. Lum