Chester County Lifetime Gift Planning Attorney

If you want to convey a gift to members of your family or close friends, you likely do not want to saddle them with expensive taxes too. It is important to make a plan when distributing gifts to ensure the tax liabilities for the gift recipients does not become a burden. Therefore, it is important to know about gift taxes and how they may impact the recipients of a gift. If you or a family member want to deliver a lifetime gift, you should consult with an experienced Chester County lifetime gift planning attorney.

The lifetime gift planning attorneys at Herr Potts and Potts are prepared to guide you through any tax implications that may arise when gifting property. Our firm has represented clients in Pennsylvania for over eight decades and is ready to represent you. To schedule your confidential consultation, call us at (610) 254-0114.

How to Make a Lifetime Gift

A lifetime gift is simply a gift that is given to another individual during the course of the grantor’s life. Pennsylvania distinguishes between lifetime gifts and gifts made in accordance with a will because Pennsylvania places a tax on inheritances. Therefore, gifts made during the lifetime of a grantor will likely have different tax implications than those made in a grantor’s will.

A lifetime gift can be anything from cash, real property, or other assets given to an individual, business, or charitable organization. The Internal Revenue Service (IRS) defines a gift as a “voluntary transfer of property from a donor to a donee” that does not require the donee to pay “full and adequate consideration.” Therefore, to qualify as a gift, the beneficiary must receive the gift in exchange for nothing or compensation that is less than fair market value. Fair market value is essentially the value of the gift at the time it is conveyed. For example, a vehicle manufactured in 2018 will cost considerably more now than in the year 2028.

As mentioned above, when you deliver a gift to a beneficiary you must give up any ownership of the gift entirely while receiving little to no compensation. When giving a gift to an individual or charitable organization, you should pay attention to how the gift is managed. If you do not believe that your favorite charitable organization is utilizing your gift properly, you should think carefully before continuing to support this organization. Additionally, you should also consider how a gift to a family member could adversely affect familial relations.

If you want to make a gift to another person or charitable organization, you should make a plan with an experienced elder law attorney.

Lifetime Gift Taxes

Before conveying a lifetime gift, you should understand any tax issues that could be triggered for you or a beneficiary. One of the most important things you should know is that some gifts are not taxable under certain circumstances. The following gifts are exempt from being taxed:

  • Gifts made to your spouse
  • Gifts given to charitable organizations
  • Gifts bestowed on political organizations
  • Money for medical or educational bills paid directly to the institution on another’s behalf

It is also important to know that if you deliver a gift that is below the annual exclusion amount for the calendar year, it will not be taxed. The annual exclusion amount for 2018 is $15,000 per recipient. This means that if you give someone a gift that is worth less than $15,000, it will not be taxed. The annual exclusion amount is determined by calculating the cost-of-living expenses for a given year. The higher the cost-of-living expenses become, the higher the annual exclusion will become.

Additionally, if you are married, you can take advantage of gift splitting. Gift splitting allows a married couple to combine the annual exclusion amount and deliver a gift worth more than $15,000 without triggering any tax implications. Therefore, married couples can give gifts worth $30,000 by evenly splitting the cost of the gift.

If you are a senior citizen and decide to give a gift, you should also think about the implications it may have on your Medicaid long-term care benefits. Gifts made within a five-year period of a Medicaid application may disqualify you from Medicaid benefits. It does not matter whether the gift was under or over the annual exclusion amount. Therefore, if you believe that you may need Medicaid benefits in the near future, you should be careful about any gifts you wish to make.

Chester County Lifetime Gift Planning Lawyers Will Help You Plan Your Estate

If you or a family member wants to know more about lifetime gifts, you should contact an experienced Chester County lifetime gift planning lawyer today. At Herr Potts and Potts, we are dedicated to working with you to develop a unique estate plan that is perfect for you and your family. To schedule a confidential consultation, call us at (610) 254-0114 or reach us online.