Gifting To Children Properly

As I previously blogged, now is a perfect time to consider gifting to children. Reuters provides some more insight on how to achieve these gifts properly so as not to break any tax rules.

• Take advantage of the 0% capital gains rate that applies to taxpayers in the bottom two brackets. You can transfer stocks and other investments for the children to sell instead of an outright car or money. The children can sell these assets free of capital gains taxes. Note that your children have to be over the age of 21, or 23 if the child is a full time student.
• Hand over your assets that are valued lower than they used to be so transfer taxes will be low.
• Be sure that you can afford to give away the assets before gifting.
• Families with large real estate holdings or businesses could transfer a small share and the gift would be discounted by at least 40%. Advisors can put together complex plans for wealthy clients to get them the most advantages.
• Check on state or local transfer taxes, because even though you may escape estate or gift taxes, you may still have to file some forms such as a federal gift tax return. Advisors can be helpful in this determination as well.

See Linda Stern, Stern Advice: Once in a Lifetime Gifting Opportunities, Reuters, Aug. 17, 2011.

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