Gifting Strategies

Inter Vivos Gifting
An inter vivos gift is one that is made while an individual is still alive. It is a great way to reduce the taxable estate – since the individual no longer owns the property when they die (though it may be subject to taxes if it is made during the three years before that individual's death, in accordance to section 2035 of the Tax Code). Gifts that exceed an annually determined, permissible amount are subject to income taxes if they are made to someone other than a spouse or qualified charity. Gifts below that amount are excluded on to the extent they qualify and are a gift of present interest (see below.)

Gift-Giving Techniques and Strategies
For gift tax purposes, a gift can be broadly defined to include a sale, exchange or other transfer of property from one person (the donor) to another (the recipient) without adequate and full consideration.

Common types of gifts can include:

  • Cash, check or other tangible item
  • Transferring title to stocks or real property without receiving anything in exchange of value
  • Forgiving debt
  • Below market loans

Appropriate Gift Property
To take full advantage of gifting strategies discussed in this section, it is most advantageous to gift property away that will appreciate substantially in the future, especially if it hasn't increased in value already. The basic principal behind this idea is that giving away property that will increase substantially in the future will exclude its present worth from the donor's estate, and also eliminate future appreciation from the estate as well.

By contrast, gifting away property that has already increased significantly in value is not as advantageous. The principal behind this is that the recipient will have the same tax basis (called carry over basis) in the property as the donor did. If the recipient were to inherit (after death) rather than receive a gift during the donor's life, the recipient obtains a basis that is stepped up to the fair market value of the property at the time of death.

Life insurance is also an excellent gift for a donor, as is out-of-state property (avoiding ancillary probate).



Strategies for Closely-Held Business Owners

Related Articles
  1. Taxes

    What Are Gift Taxes?

    If you're not sure what gift taxes are, read on and we'll explain.
  2. Retirement

    4 Thoughtful Retirement Gift Ideas for Men

    This"best gifts list" of the most thoughtful retirement gifts for men includes items appropriate as gifts from co-workers, friends or family members.
  3. Insights

    3 Best And Worst Gift Cards For 2012

    Here are the gift cards that offer the best deals and those that aren't worth your money.
  4. Taxes

    What The New Gift Tax Rules Will Mean

    The lifetime maximum for gift taxes is $5.12 million. However, it could drop to $1 million. Here's what that will mean.
  5. Personal Finance

    6 Tips For Getting The Most Out Of Gift Cards

    Gift cards are big business, amounting to an estimated $91 billion in annual retail spending. Get the most bang for your gift card buck.
  6. Insights

    Why Retailers Love Gift Cards

    Gift cards have many benefits for retailers compared to cash sales. We'll look at a few of them.
  7. Personal Finance

    How to Talk to Your Family About Christmas Gift Budgets

    Talking Christmas gift budgets with family members can be hard, but having the talk will help you stay on track financially.
  8. Managing Wealth

    The New Generation Of Charitable Gifts

    Stuck for a gift idea? These gifts give to more than your recipient.
  9. Personal Finance

    How To Get Gift Cards At A Discount

    Use these tips whether you're buying someone a gift or just want to score a discount at your favorite stores.
  10. Personal Finance

    Top Websites For Discounted Gift Cards

    Gift cards can cost less when you buy them through a discount website. Just do the math before you cough up the cash.
Frequently Asked Questions
  1. Why is social responsibility important to a business?

    Take social responsibility seriously, and your business could benefit from happier, more productive staff members while helping ...
  2. Which socially responsible retailers appeal most to ethical investors?

    Learn why ethical investors have many options in the retail sector, and discover which retail companies are most popular ...
  3. What are Some Examples of Free Market Economies?

    Learn which of the world's economies best resemble free market economies, marked by free trade, low government involvement, ...
  4. Who Decides When to Print money in India?

    Find out the role of the Reserve Bank of India, or RBI, and the amount of authority given to the government. Learn who is ...
Trading Center