To our clients and friends:
Many people are making their annual gifts to family members at this time. For at least a decade, the maximum amount of a single gift qualifying for the annual gift tax exclusion was $10,000. Several years ago, the tax law was changed to index that amount for inflation. For the year 2002, the amount has been raised to $11,000 (or $22,000 for a married couple) per donee. For example, a married couple making "annual exclusion gifts" to 3 children and 4 grandchildren can now give an aggregate gift, not subject to gift tax, of $154,000 (Husband gives $11,000 to 7 donees [$77,000] and wife gives the same [another $77,000]). In prior years, the maximum annual gift the foregoing couple could have made would have been $140,000.
We recommend that annual exclusion gifts be made early in the year to allow the donees to get the benefit of the current year’s income and appreciation on the investment made with the gift. We also recommend not using appreciated securities to make such gifts, as that would saddle the donee with an eventual capital gains tax on all of the appreciation since the donor’s basis is carried over to the donee.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
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