Tip of the Week: Virtues of Gifting (6/12/00)

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	Virtues of Gifting Financial Tip of the Week by Deloitte & Touche OnLine June 12, 2000

It can help save on taxes, and make you feel good, too.

See our archive of previous tips on your money, your taxes and your financial plan.

One method of reducing your estate is through lifetime gifts. You can give $10,000 a year in cash or value of property to any number of different people without incurring a gift tax liability. (Note: Gifts of certain partial interests in property and gifts to trusts may not qualify for this exclusion.) You and your spouse as a married couple (if both are U.S. residents) can jointly give $20,000 per year to each recipient.

The two primary advantages of gifting are

Any postgift appreciation is not subject to the transfer tax unless the gift is included in the estate. For example, if you give property worth $10 and at death the property is worth $50, $40 escapes transfer taxes. (However, $40 in potential capital gain could have been avoided by having the asset included in the estate.)
Any gift taxes paid on gifts made more than three years before death will not be subject to estate tax. For example: A donor in the 50-percent transfer tax bracket has $1.50, which allows him or her to make a gift of $1.00 and pay tax of $0.50. If the $1.50 is retained in the estate, the heirs will receive only 50 percent of the $1.50 or $0.75, as compared with the $1.00 gift. Thus, heirs may benefit by early transfer even when the maximum transfer tax is extracted.

For more information, see our Estate Planning Guide.