As parents, we want to take care of our children. We don’t only want to make sure our children are taken care of when we die, but we also want to help them while we are here. Many parents want give their children money or property during their lives. We do this to help our children get started or help them out in getting established. However, some parents would be deterred in making such transfers if they were aware that these transfers might subject them to tax liabilities.
Before considering whether or not to give a gift, consult with a New York estate attorney to learn about tax consequences which result from making such gifts.
One way to avoid paying gift tax is to stay under the annual federal exclusion amount of $13,000 for an individual or $26,000 for a couple. For example, Dad can give his son Joe a gift under $13,000 without paying gift tax, or Dad and Mom can combine their exclusions, to give Joe a gift of $26,000 (tax-free)
Another way you can help a family member or friend is to pay medical, dental and educational payments on their behalf straight to the provider.
Other ways to help family and friends?
1- Hire family members or friends as employees with a reasonable pay
2- Rent free living (so long as fair market value of rent doesn’t exceed annual exclusion limit)
3- Lend money to family and friends at a more favorable rate (you have to charge minimum rate to avoid gift/tax consequences)
4- Put money into Section 529 Education Savings plans for relatives.
To discuss your gift giving options, call the Law Offices of Albert Goodwin at 718-509-9774.