The federal gift tax works hand in hand with the estate tax to prevent people from avoiding estate taxes by giving away all of their money and property tax-free while they’re alive. Few people actually pay gift taxes, but all high-net-worth people need to be aware of them.
What Is a Gift?
A gift occurs when you give someone money or property for nothing or for less than its full value. For tax purposes, it doesn’t matter whether you intend for the property to be a gift. It is treated as a gift if you don’t receive full compensation for the property that’s given.
Any type of tangible or intangible property can be a gift—for example:
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Cash
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Stock
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Cryptocurrency
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Real estate
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Art and collectibles
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Business interests
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Vehicles
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Interest-free loans
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Forgiving a debt
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Irrevocably assigning a life insurance policy to another person
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Making a non-commercial transfer of property into joint tenancy with another person (except for joint bank accounts)
You can give a gift to anyone; it doesn’t have to be a relative like a child or grandchild. There is no legal limit on how much you can give.
You can make a gift directly to a person without restriction—for example, write them a check. This is the simplest type of gift, but you lose control over the property involved.
For this reason, gifts are often made through various types of trusts. Irrevocable trusts (trusts you can’t terminate or change) allow donors to remove ... Log in to view full article.