Library Categories


How to gift assets without incurring penalty

Gifting assets is a powerful planning tool. It not only reduces the value of your estate for taxes, but as land and other assets appreciate, the appreciation occurs outside the estate.

For 2011 and 2012, Congress generously expanded the limits on the amount of assets that can be excluded from federal estate tax and the limits on tax-free gifting.

A taxpayer each year can gift $13,000 to another individual — to many individuals — tax free. If a father has four children, he could gift each child $13,000 without any gift tax consequences. This is the annual gift exclusion. If you gift too much, the beneficiary will have to pay taxes on the amount over $13,000. They are along the lines of estate tax rates.

However, the donor could apply the amount over $13,000 toward the donor’s Estate Tax Credit, or gifting “piggy bank,” which Congress expanded to $5 million for ’11-12. If a father gifts $50,000 to a son; it’s $37,000 above the annual gift exclusion.

The $37,000 would be subtracted from the father’s Estate Tax Credit. It would be reduced by $37,000, leaving him $4,963,000 either for future gifting or for exclusion of assets at his death.

Reach Schwarz at 260-351-4440, or These articles are for general information purposes and do not constitute an attorney-client relationship.

This article published in< the March, 2012 edition of INDIANA PRAIRIE FARMER.

All rights reserved. Copyright Farm Progress Cos. 2012.