Taking Advantage of the Yearly Gift Tax Exemption

In addition to the $5 million lifetime gift tax exemption, each taxpayer can make as many gifts as he or she wants each year as long as no one person receives more than $13,000. These gifts can be to anyone (not just relatives), can be of any type of property, and can be made outright or to a trust.

People can shift large amount of assets out of their estate without ever touching their lifetime exemption. However, in considering what to give now and what to leave in your estate, be aware that the donor’s cost basis is transferred to the recipient with lifetime gifts but not testamentary gifts. Thus, if you have $13,000 worth of stock in company XYZ that you paid $1,000 for, it would be better to leave it to someone at death rather than gifting it now.

See Laura Saunders, How the $13,000 Gift-Tax Exemption Works, W.S.J., Feb. 1, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.