“Ask Your Attorney” Column

Ask Your Attorney

About The IRS Rules On Gift Tax

Dear Counselor: I want to cash in a CD and give the money to my daughter who really could use the money. I have friends who said something about having to pay a “gift tax” if I do that. Is it possible that the IRS even taxes gifts?

Dear Client: The IRS enforces the gift and estate tax rules, and it is true that gifts in excess of a certain amount are subject to tax. Although the current law is now being debated, and changes are sure to come in the coming weeks, for years the law provided that everyone could make gifts having a specified value without there being any tax, or any need to file a “gift tax return”. In 2012, an individual can give up to $13,000 (each) to kids, grandkids, or others, without any gift tax consequences. If you are married, and your spouse joins in the gift, the amount you can give is doubled to $26,000. Next year, the amount is scheduled to increase to $14,000 and $28,000, respectively. So, if you wanted to cash in a $25,000 certificate, you could do so, and give the cash to your daughter in two installments ($13,000 at Christmas in 2012, and the balance of $12,000 on New Year’s Day) without any gift tax consequences. Larger gifts can also be made, but are subject to another set of rules which are too complicated to go into here. There are other gift tax rules which authorize you to pay as much as you want for college tuition or other educational expenses. Since rates for taxable gifts can be very high (the rates range from 35% to 55% !), if you are interested in making gifts having a value in excess of the $13,000 exclusion amount (or $26,000 for a couple), you should come in for a consultation so we can help avoid any unexpected tax assessment.

John L. Maier, Jr.
Marcus Weden

Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121