In my experience by far the most misunderstood tax is the federal gift tax. With 2009 behind us, now is the time to make a list of all of the gifts you made last year. Write down the name of each person you made gifts to and the date each gift was made, and then total up the value of all of the gifts. Now ask yourself the following questions:
- Is the person who received the gift(s) your spouse? If your spouse is a U.S. citizen, then under most circumstances the gifts you made to your spouse during 2009 will not be subject to any federal gift taxes. On the other hand, if your spouse is not a U.S. citizen, then under most circumstances only the first $133,000 of gifts you made to your spouse during 2009 will not be subject to federal gift taxes and anything over this amount will have to be reported as a taxable gift on IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, on or before April 15, 2010.
- Is the person who received the gift(s) someone other than your spouse? Depending on the nature of the gift, who the gift was actually paid to, if the recipient of the gift had immediate use of the gift, and if the gift came exclusively from you or from both you and your spouse, then you may be required to file a 2009 federal gift tax return, IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, on or before April 15, 2010.
The bottom line is that you are not free to give away your property to just anyone without understanding the possible gift tax consequences since even though the federal estate tax has been repealed for 2010, the federal gift tax is here to stay. If you're not sure if the gifts that you made during the course of 2009 are taxable for federal gift tax purposes, then consult with your estate planning attorney and accountant to be sure.
Julie: Read with interest your comment about the excess inter-spousal gift above $133,000 to a Non-Citizen spouse would be a taxable gift. What if the Donor Spouse were a U.S. citizen? Would the excess, or indeed even the first $133K, be sheltered by the Donor’s $One Million Lifetime Exclusion? Thanks in advance for your comment. By the way, your e-mail link does not bring up a template for e-mail. You might check it.
Hi Gene,
Yes, gifts made by a U.S. citizen to a non-citizen spouse qualify for the $1,000,000 lifetime gifting exclusion, and a gift of $133,000 made by a U.S. citizen to a non-citizen spouse will qualify as an annual exclusion gift.
Sincerely,
Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com
Julie:
Thank your for your reply. Now for the tougher question: what about a gift from a Non-Citizen Spouse to a Non-Citizen spouse?
Thanks.
Gene
Hi Gene, the answer to your question depends on several factors, including whether the spouses are resident or nonresident aliens and whether the gift is of property located in the U.S. or not. This article should help to explain the basic concepts:
Practical Estate Planning for Noncitizens Who Reside in the United States
Sincerely,
Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com
Just to be sure I understand, and using a specific (simple) example, if a spouse gives a non citizen spouse a gift of $1,133,000 this year, he would in theory have to pay tax on $1,000,000. However, could he also choose to let the amount over $133,000 be deducted from his lifetime limit of $1,000,000 (assume that he has never had to deduct from that in the past) ?
In that case, he would not have to pay tax on the gift to the non-citizen spouse, but he has zeroed out his lifetime limit. Do I have this correct ? What form would he need to file for the above gift to the non-citizen spouse ?
Hi Mark, your analysis is correct except that I don’t think the taxpayer can choose to pay the tax and not use the lifetime gifting credit – won’t have time to research this in the next few days and so an accountant or tax attorney should be consulted to be sure.
With regard to form that needs to be filed, it is IRS Form 709, United States Gift (and Generation-Skipping Transfer Tax) Return.
Sincerely,
Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com
The information contained in this comment is not legal advice or tax advice. For legal advice please consult with an attorney and for tax advice please consult with an accountant.
Does a US gift tax return have to be filed if a US citizen (Step Mom) gifts $300,000. of securities to a step daughter who is not a US citizen and lives in France.
Hi Andy, in general any gift made by a U.S. citizen of U.S. assets will be subject to U.S. gift taxes, regardless of where the recipient lives or is a resident. Step Mom should consult with an accountant or tax attorney who will be able to review the exact facts of Step Mom’s situation and give her a definite answer.
Best regards,
Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com
The information contained in this comment is not legal advice or tax advice. For legal advice please consult with an attorney and for tax advice please consult with an accountant.
My in-laws want to put $10,000/year into a mutual fund account held inside a trust for the grandkids. The trust specifies that the kids don’t have access until they are 35. Would they be subject to the gift tax since the kids can’t touch the money until a future date?
Hi Rob, as long as the gifts remain at $13,000 or less per in-law and per child per year and the trust is drafted properly, gift taxes won’t come into play at all.
In other words, the fact that the kids won’t be able to touch the money until 35 is not the relevant factor. The relevant factors are how much of a gift is being made per in-law and per child and if the trust has been drafted properly to allow the money funded into the trust to qualify as annual exclusion gifts:
What is an Annual Exclusion Gift?
Best regards,
Julie Ann Garber, Esq.
Your Guide to Wills & Estate Planning
email: wills.guide@about.com
http://wills.about.com
Maybe you can help me with my situation. My cousin needed help with a down payment on his house. I gave him $25,000 and i signed a gift letter that you give to the lender. On the same month, his daughter in law decided to pay me back the $25,000. Can i still consider the money i gave him as a gift (because i signed the gift letter) eventhough his daughter in law gave me money a few days after the closing of the house? Should i still file the form 709 for gift tax?
Hi Samantha, you need to speak with an estate planning attorney or accountant to unravel your situation and advise you as to what needs to be filed with the IRS.
Best regards,
Julie Ann Garber, Esq.
Attorney, Becker & Poliakoff, P.A.
Guide to Wills & Estate Planning
http://wills.about.com
email: wills.guide@about.com
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One more question (if you wouldn’t mind)–if one spouse gives another spouse property greater in value than $13,000, would a gift tax return be required even though there is no gift tax to be paid? Say some land that one of the spouses inherited. Both spouses are U.S. citizens. Thanks!!!
Can we gift our daughter 13000 before April 15 for 2011 and then another 13000 after April 15 for 2012? Also, all of our accounts are joint accounts. If we transfer funds to our daughters account from a joint account, is it considered a split gift? My wife does not work so all the funds in the account are from my job.