If you’re like most people, you’ve heard of the annual gift tax exclusion of $13,000.  This means that you can give away up to $13,000 to anyone and everyone each year and not pay gift taxes.  So, the answer to the question, “Can I give my child $13,000 without paying any gift tax?” is “YES!”

However, if you can comfortably afford to give away more than $13,000, you need NOT be limited by the $13,000 annual exclusion amount.

Here are 5 ways to give away more than $13,000 to your child without paying any gift tax:

• If you are married, you and your spouse can “split gifts.”  This means that your annual gift tax exclusion is doubled from $13,000 to $26,000 per recipient. 
• In 2011 and 2012, you can give away up to $5,000,000 without incurring gift tax.  This number is doubled to $10,000,000 if you’re married.
• You can pay unlimited medical expenses directly to the provider for anyone.
• You can pay unlimited tuition expenses directly to the provider for anyone.
• Create a grantor trust for your beneficiaries and pay the trust’s income tax.

Two important gifting rules:

• Never give away more than you can afford.  Your sense of security and well-being are more important than any other goals.  You must be able to sleep at night.
• If you’re going to gift significant amounts that aren’t going to be spent immediately, gift into a trust for your beneficiary, as opposed to gifting outright.  Gifts in trust are protected from predators and creditors such as a divorcing spouse, malpractice suit, bankruptcy creditor, business failure creditor, and car accident or slip and fall plaintiff.

If you have questions about giving $13,000 to a child and other gifting without the wrath of the gift tax, call our office for a free, no obligation consultation.  (619-696-0778)

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.