Gift of $12,000.00 to any individual

Question

I understand that you can give each person of your choosing, no matter how many a gift of $12.000 each year without any tax liability. What exactly does this mean and what are the benefits to me???

Answer 1

the benefit to you is whoever you gave the 12,000 to would be your friend for life

Answer 2

Gifting is usually an estate planning tool.  It allows you to transfer wealth without tax liability for the receiver and without you having to pay a gift tax.

If you are married, you and your spouse can give $24,000 to any individual or entity, gift tax free.  Keep in mind that if you are transferring income, you still owe the tax on what you received.  You are not limited in the number of receipients, as long as you don't exceed the individual limit for each.

If you owned a very large asset, such as real property, a business, or an investment, you can incorporate the asset and transfer a portion each year, up to the limit, in order to effect a complete transfer over a number of years.

In addition to the gift tax exclusion, you can take an advance on your estate tax exclusion, in which case, you can transfer up to the total amount of your exclusion now, instead of waiting until you die.  This is a good way to transfer assets that you plan to hold, but expect to increase significantly over a number of years.  

For example, if you transferred a stock portfolio worth $625,000 today to your minor child using the exclusion, and it was worth $1.5 million in 20 years, at your death, you have effectively increased your exclusion from $625K to $1.5MM by making the transfer now, instead of at your death.

See a financial planner in your area, if any of these issues are meaningful to you.

Good luck!