Longmont Gift and Estate Tax Attorney
Our goal at Brady, McFarland & Lord, LLC is to ensure that you reap as many tax benefits as possible. We can help you with any gift and estate tax questions or concerns, as well as help you with business and estate planning. We have been assisting clients in the community for decades and can inform you of the benefits and implications of gift splitting, as well as other tools that can help you save money on gift and estate taxes. Call our Longmont gift and estate tax attorneys at (303) 420-2863 or contact us online for a free initial interview.
What is Gift Splitting?
Gift splitting is when a married couple combines their individual gift tax exemptions. This is not an automatic process. Certain prerequisites have to be met, and both spouses must give consent and file a federal gift tax return to engage in gift splitting. The goal of gift splitting is to enhance tax benefits, but in some circumstances, it can actually have the opposite effect. For this reason, it’s wise to consult an experienced attorney to help you determine the best course of action and the proper way of doing things. If you and your spouse gifted money or other assets and then get divorced before filing your tax return for the year the gift was given, you will not be able to take advantage of gift splitting if either spouse gets remarried before filing the tax return.
An Example of Gift Splitting: You have an adult child who wishes to renovate their house, and it’s going to cost $26,000. If you write them one check for $26,000, you are over the $15,000 annual gift limit. If you and your spouse each write a check for $13,000, neither of you is over the limit.
Other Gift Splitting Requirements
To reap the benefits of gift splitting, you must do it properly. The following are some of the other requirements of gift splitting:
- The gift must be made to a third party. It cannot benefit you or your spouse.
- You and your spouse must be married at the time the gift was given
- The spouse giving the gift cannot give the consenting spouse a power of appointment over the gifted property
- Once you elect to split gifts with your spouse, all gifts must be split for the year. In some cases, this can be avoided. If you find yourself in this situation and want to give gifts but you don’t want to split them with your spouse for the rest of the year, contact an attorney so they can help you find a legal workaround.
Generation-Skipping Transfer Tax
If you and your spouse decide to split gifts for the year, you will both be treated as though you have each made half of all the couple’s eligible gifts for generation-skipping transfer tax (GSTT) purposes.
The GSTT is a tax that you incur when you transfer property and it skips a generation. For example, if you give a gift directly to a grandchild, you might incur a generation-skipping transfer tax. This tax was implemented as a way to prevent families from bypassing estate taxes by making gifts directly to grandchildren or great-grandchildren. People would skip transferring their property or assets to their children to avoid their inheritance being subject to estate taxes twice. If you transfer property and avoid gift or estate tax at a generation level, the IRS will impose the GSTT.
Contact Our Longmont Gift and Estate Tax Lawyers Today
If you’re considering gift splitting and want to make sure you’re doing it in a way that benefits you to the greatest extent possible, contact us for a free consultation. Our Longmont estate planning attorneys will do everything in our power to make sure your assets and gift-giving are organized in a way that allows you to reap as many tax benefits as possible. Call our office at (303) 420-2863 or contact us online for a free initial interview.