Gift-Splitting Rules and Tips

Married couples can split gifts so as though each spouse gifted half to double their annual gift tax exclusion amount. There are a few basic rules to keep in mind when gift-splitting, and a few specific things to keep in mind as well.

Rules:

• The gift has to be made to a third party, not a spouse.
• Both spouses must be US citizens/residents at the time of gift.
• At the time of the gift, spouses must be married.
• If spouses divorce within the year that they gave the gift, each spouse has to wait until that year is up to remarry.
• Both spouses need to consent to split the gift.
• Spouse making the gift cannot give power of appointment over the gifted property to the consenting spouse.

Things to be Aware of:

• Gifts made to a third party and a spouse can only be split if third party’s interest is ascertainable.
• Typically, once spouses choose gift-splitting, they have to split all eligible gifts for that year. There are a few ways that this can be avoided, including giving an unascertainable portion of the gift to the spouse.
• Ensure that both spouses consent. Otherwise, if the couple divorces later, it could be too late to revoke the gift.
• Rules relating to the GST exemption are applied to both spouse’s portions of the gifts unless the spouses specify otherwise in a gift tax return.

See William H. Byrnes & Robert Bloink, Can Gift-Splitting Go Wrong?, AdvisorOne Newsletter, Nov. 26, 2011.

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