What adavantage is it to a parent to gift son $12,000?

Question

If parents have 3 million and above in CD's and other investments does it beneift the parents to gift thier child $12,000 or only if they rent property to the kids

Answer 1

The advantage is passing on some of the families wealth without having to pay estate or gift taxes.  If the parents survive past 2010 the estate tax is scheduled to be repealed.  This could change because of Americans grumbling about the rich not paying enough taxes.

Answer 2

By giving your child $12,000, that much is exempt from gift tax, or estate tax later if an estate tax is due.  Under current law you wouldn't owe estate tax, but that is one of the laws under discussion by democrats for repeal.

Answer 3

If they gift it while alive, then it is not subject to estate tax when they die.

Answer 4

The "advanatage" to the parent is that by giving money to their child they reduce the size of their estate.  If their estate is large enough to be taxed, the tax rate is high.

The government limits how much money can be transferred to one individual per year by limiting tax free gifts to $12,000.