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Deciding Whether to ‘Gift’ During Your Lifetime, And How Best to Do It


Giving away assets while you are alive has typically carried with it a number of benefits, one of them being helping to lower estate taxes when you pass. However, the federal estate tax exemption is currently very high: at $11.4 million per person–and increasing every year–this exemption ends up being applicable to very few people. And even if it decreases, it will still apply to a very small percentage of people. As a result, realistically, there are really only a few reasons why gifting during your lifetime may still make sense for you, as we discuss below:

Capital Gains

While state estate taxes may serve as an incentive for some, the state of Florida actually does not have a death tax, which means that qualifying estates are only responsible for the federal estate tax. As a result, giftors and giftees sometimes focus on capital gains tax, or the tax on the profit. When you gift assets, the recipient takes on a tax on that asset based on the difference of what you paid for it and what it was worth when you gifted it. So, for example, if you purchase something for $20 and it is worth $200 when you gift it, the recipient will pay taxes on $180 of gain. As a result, any gifting should be analyzed carefully to make sure your loved ones are not exposed to unwanted and burdensome capital gains taxes.

Planning For Long-Term Care

Still, gifting can help protect assets if for example you want to qualify for certain programs later in life, such as Medicaid to help pay for any nursing home care. In order to qualify for Medicaid an individual cannot have beyond a certain amount of assets, and the program looks at five years of financial records to determine this, including any assets you have given away during that five-year period. However, assets that are given away before that can help ensure that your loved ones receive assets and you ‘losing’ those assets can then perhaps help you qualify for programs such as Medicaid. If this is of interest to you, you want to make sure that you obtain assistance from an experienced estate planning attorney who knows elder law as well.

Giving Just To Help

However, for many people, the purpose of gifting while they are alive is simply to help their loved ones with an expense, for example, with a down payment on a home, or something else. If you are interested in making these types of gifts, there are a number of issues that you need to consider, such as the amount, the intended use, whether the recipient has any issues with creditors, whether the recipient is married and might get divorced etc. For example, some gifts qualify for a gift tax exclusion, such as gifts for education, and therefore need to be handled in a very particular way (i.e. paid out to the educational institution instead of directly your loved one, for example). And any gifts for homes should be made after consulting with an attorney, as you want to make sure that it is done so as to preserve the home and its value for your loved ones–i.e. so that it is not divided in the instance of divorce. In addition, any gift that is more than $15,000 in a year usually requires that you file a gift tax return; even though you should not owe gift tax as long as the total amount of gifts that you make during your lifetime are less than $11.4 million.

Contact Our Florida Gift & Estate Planning Lawyers

If you live in Florida and have questions about gifting during your lifetime, contact our experienced Orlando estate planning attorneys at the office of Gierach and Gierach, P.A. today.




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