United States: Getting Into The Spirit Of Giving: Making Your 2017 Gifts To Friends

Keywords: GST, Gift, Tax, Exemption,

For many people in the United States, the holiday season is a time for making gifts to family members and other loved ones. Larger gifts can be made using the federal Gift Tax Exemption and Generation-Skipping Transfer ("GST") Tax Exemption. However, annual exclusion gifts must be made before December 31, so now is the time to make your 2017 annual exclusion gifts if you haven't already done so!

Annual Exclusion Gifts

The annual exclusion amount is the maximum amount that you can give to any single recipient during a calendar year without incurring gift tax and without using any of your lifetime Gift Tax Exemption. For 2017, the annual exclusion amount is $14,000 (or $28,000 if you and your spouse choose to "split" gifts). However in 2018, the annual exclusion amount increases to $15,000 (or $30,000 if you and your spouse choose to split gifts).

Annual exclusion gifts can be made to anyone, although children and other descendants are the most common recipients of these gifts. Annual exclusion gifts can also be made to certain trusts and 529 plans instead of being made outright to an individual. If the recipient has earned income, he or she could use a portion of your annual exclusion gift to fund a Roth IRA, which would allow those funds to grow income tax free for the recipient's lifetime.

The annual exclusion amount applies to each person to whom you make a gift. For example, if you decide to make gifts of the full $14,000 annual exclusion amount to 10 different people this year, you can remove $140,000 from your taxable estate without paying gift tax or using any of your lifetime Gift Tax Exemption.

The annual gift tax exclusion amount does not carry over from year to year. Annual exclusion gifts made after December 31 will count against your 2018 annual exclusion amount. Note that a gift by personal check is not considered complete until the bank clears the check. Therefore, any personal checks for 2017 gifts should be given early enough that the checks can be cleared before the end of the year. Alternatively, you can use wire transfers or cashier checks.

Tuition and Medical Care Gifts

In addition to annual exclusion gifts, you may make tax-free gifts to your family members and others by paying their tuition and medical expenses. These payments will not count against your annual exclusion amount or your lifetime Gift Tax Exemption as long as they are made directly to the school or health care provider.

Larger Gifts Using Gift Tax Exemption and GST Exemption

If you would like to make larger gifts, the Gift Tax Exemption and GST Tax Exemption are each $5.49 million in 2017 and will increase to $5.6 million in 2018. If gifts are made in excess of these exemptions, the maximum rate for estate, gift and GST taxes is 40 percent for 2017 and 2018. Unlike annual exclusion gifts that can be made each year, the Gift Tax Exemption and the GST Tax Exemption are amounts to use during your lifetime or upon your death. These exemptions are reduced by your cumulative gifts during your lifetime. Once you use a portion of your Gift Tax Exemption or GST Tax Exemption, it is gone forever, so please speak with your estate planning lawyer before making any large gifts.

Remember that when you make a gift of an asset that may increase in value, any future appreciation and income that the asset generates will also be removed from your estate, thus increasing your tax savings.

Other 2017 "Treats"

We circulated a Legal Update in July 2015 that indicated the Internal Revenue Service was working on proposed regulations under Section 2704 that could impact the use of minority interest and lack of marketability valuation discounts for certain family-owned entities. The IRS did propose such regulations on August 4, 2016, but the proposed regulations were withdrawn on October 20, 2017 as regulations targeted by the Trump administration that "are unnecessary, create undue complexity, impose excessive burdens, or fail to provide clarity and useful guidance."

As you may be aware, the House of Representatives passed the Tax Cuts and Jobs Act in November 2017, which increases each of the federal Estate, Gift and GST Tax Exemptions to $10 million indexed for inflation (which would likely result in an $11.2 million exemption per person in 2018). The Tax Cuts and Jobs Act would repeal the Estate and GST Tax in 2024, but the Gift Tax would be preserved. The step-up in basis for assets at a person's death would be preserved even after the Estate Tax is repealed. The tax reform bill passed by the Senate on December 2, 2018, also increases the exemptions to $10 million indexed for inflation from 2011 but does not repeal the Estate or GST Tax. At the time of this update, no new tax law has been passed. We will provide an additional Legal Update if and when the new tax law is passed.

If you have used all of your Gift Tax Exemption and are considering making large gifts and paying gift taxes in 2017, you should wait to see if the tax reform bill becomes law before making such gifts to potentially use the increased Gift Tax Exemption.

As always, it is best to consult your estate planning lawyer or tax advisor about Gift Tax filing obligations (especially for split gifts), 529 plan gifts and large gifts that utilize the lifetime Gift Tax Exemption before making such gifts.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2017. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Ostrow Reisin Berk & Abrams
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Ostrow Reisin Berk & Abrams
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions