How much can you realistically afford to gift without jeopardizing your own financial security? The question is complex and the right answer might be the wrong answer!
As you may know, current law allows you gift a large sum of $5 million (more than $10 million for married couples) without triggering any gift taxes. Since the law is set to expire at the end of 2012, many are left guessing as to what will happen next year and gearing up for a very “gifted” 4th Quarter. But as you make plans to take advantage of the gift tax savings, have you carefully considered your own financial needs and goals?
From a tax planning standpoint, there may never be a better time for you to make a large gift. But, you know that life is about more than tax planning. The real question you need to answer, if you are inclined to make substantial gifts, is whether – and how much – you can afford to give. Wealth Strategies Journal recently published an article, “How Much Can You Gift,” to help you through the decision process.
Some things to consider:
- Your personal goals, especially for retirement. Will they still be adequate after your generous gift?
- Your age and health. Do you have many more income-producing years ahead, or is it possible you may need more money to provide for yourself and your spouse, especially if there are health issues to consider.
Consult the cited article for more gifting considerations. For example, you should not gift away – in any form – assets that are essential for your own financial needs. You can gift away assets to your children (or trusts for them) that you will never need. And don’t forget about estate planning tools that can help you make gifts that you may need, with “just in case” access if you do. Seek appropriate legal counsel for more information.
Reference: Wealth Strategies Journal (November 8, 2012) “How Much Can You Gift”