Pennsylvania Lifetime Gift and Tax Planning Attorneys

Looking to the future and planning ahead is the foundation for having a solid estate plan. If you have any property you wish to gift to your family and friends, it is important to understand that you cannot simply give away property without any tax consequences. If you are concerned about the tax implications of giving a gift to another person, you should speak with an experienced gift and tax attorney.

The Pennsylvania gift and tax planning attorneys of Herr Potts and Potts are highly knowledgeable in local, state, and federal tax regulations. Our lawyers have served clients in southeast Pennsylvania in various tax and estate planning matters and would be happy to serve you. To schedule your confidential consultation, call us at (610) 254-0114 or contact us online.

What is a Lifetime Gift?

A gift is a piece of property, cash, or assets which is transferred to another person or organization in exchange for nothing or something that is less than the fair market value in return. Therefore, a lifetime gift is a transfer of property to a beneficiary made during the grantor’s (gift-giver) life.

Most gifts are not subject to taxation. For example, a gift made to your spouse will not be taxed. However, the gift tax may apply when making a gift to another individual. To be clear, gifts given to someone are not taxed until the value of the gift or gifts exceed the annual exclusion for the year. An annual exclusion dictates the total value of gifts a donor can grant without facing tax consequences. For example, you can give someone a gift which costs $4,000 and face no tax consequences, however, if you give someone a gift worth $20,000 you will likely face tax consequences.

Typically, the beneficiary of your gift does not have to pay a federal gift tax or income tax for receiving the gift.

Lifetime Gift Taxes in Pennsylvania

The gift tax applies to property given to another as a gift. The definition of a gift includes property which is given, the use of property, and the right to receive income from property. Additionally, if you sell property for significantly less than the fair market value of that property or deliver an interest-free loan, you could be giving a gift.

Generally, all gifts are taxable gifts. However, there are various exceptions to this rule, such as:

  • Gifts which do not exceed the annual exclusion for that calendar year (excludes gifts of future interests),
  • Medical bills and tuition paid directly to a medical or educational institution for another person,
  • Gifts to your spouse,
  • Gifts to charities, and
  • Gifts made to a political organization to use.

When making gifts to different people, a separate annual exclusion applies for each person. The amount of the annual exclusion is based on the cost-of-living expenses for a given year. After being marked at $14,000 for the past five years, the annual exclusion for the year 2018 is $15,000 per recipient.

Gift splitting is another method which can be used to avoid taxes on gifts. Gift splitting is when a married couple make a gift to a third party and agree to split the cost of the gift evenly. By splitting the gift each spouse can claim the annual exclusion for their half of the gift. This would mean a married couple can claim $30,000 worth of an annual exclusion for a gift.

If you and your spouse agree to split a gift, you must file a gift tax return.

When to File a Gift Tax Return

You must file a gift tax return if you have done any of the following things:

  • You gifted property to at least one person that cost more than the annual exclusion allows (not including your spouse).
  • You and your spouse agree to split a gift.
  • You gave some a gift of a future interest, meaning the recipient cannot possess, appreciate, or receive income from until some time in the future.
  • You gave your spouse an interest in property that will be ended by some future event.

Additionally, giving a gift does not ordinarily affect your federal income tax. Nor can you deduct the value of any gifts you make or any federal gift resulting from making those gifts.

Work with One of Our Lifetime Gift and Tax Attorneys to Plan Your Estate

If you wish to gift a part of your estate to your family or friends, you should consult with a diligent gift and tax lawyer. At Herr Potts and Potts, our Pennsylvania gift and tax lawyers possess decades of experience in tax law that will be put to work for you. Our lawyers work tirelessly to stay abreast of topics like gift taxes and tax exemptions for clients who wish to efficiently plan their estate. To schedule your confidential consultation, call us at (610) 254-0114 today.