3rd Dec 2013

One main objective of estate planning is tax planning.  Nowadays a popular way to reduce estate taxes is through gifting.  Many estate owners like using this tool because they get to see their beneficiaries benefit from their gifts.  As an estate planning attorney from Orange County, I advise consulting a professional to help with your gifting practices.        
Watch out for the gift tax.  Even as you strive to save on estate tax through gifting, you must watch out for gift taxes.  Using current tax laws, you can give $14,000 a year to your recipient without incurring gift tax.  To avoid gift tax, you may gift other recipients with your gifts.  Another recipient to consider is charities and charitable institutions.  You can save on estate and gift taxes by doing good.    
Besides the annual gift tax exclusion of $14,000, there is a separate life-time gift exclusion which is currently $5.25 Million.  Availing of this exclusion is not that simple.  I suggest you consult an estate planning attorney and a certified public accountant when you want to use your life-time exclusion.   
Four Elements of Gift.  Just like with wills and trusts, gifts may be deemed not valid.  In other words, these may be contested after your death in the computation of your estate tax.  In order to be considered a valid gift, a gift must satisfy four elements.  These are (1) the donor or the gift-giver’s capacity to obtain the gift; (2) donative intent; (3) actual transfer of the gift; and (4) receipt and acceptance by the donee.  Even if your transaction meets three of these elements, but lacks a fourth, it does not become a gift.
Making sure that your gift is considered legally valid should not be taken lightly.
Gifting Real Estate or Company Ownership.  When you are giving real estate or compay ownership as gifts, be sure to have the real estate property or business appraised by a licensed appraiser or a specialist in business valuation.  For such transactions, your accountant must prepare a tax report and indicate the appraised value as verified by the expert you hired.

Gifting is an effective way to save on your estate taxes as well as help your loved ones while you are still alive.  But as an estate planning attorney in Orange County,  I always stress the need to work with your lawyer to ensure your gifts work as you intended them to.

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