What are the limits to sharing the wealth with family, friends?

Given a choice many of us would rather give our hard-earned wealth to anyone in the family except Uncle Sam.  Here are a few ways to give money to those we care about most, be it a family member or friend.

Spouses can give an unlimited amount to each other.  The IRS does not put restrictions on the transfer of wealth from one spouse to another. The exception is gifting to a non-citizen spouse, which has a gift-tax exclusion of $149,000 for 2017. This may seem obvious and of little value. However, it can have significant impact on preserving wealth in the case of extensive medical and long term care expenses.

You can give $14,000 (the amount it's been since 2014) annually to as many individuals as you like, family or friends, under the annual gift tax exclusion.  A husband and wife can each make $14,000 gifts for a total of $28,000 to an individual per year.  Neither the giver nor the recipient pays taxes on these gifts under the exclusion amount.

Your annual $14,000 gift can be used to fund 529 college savings accounts. Additionally, the tax code allows taxpayers to make a lump-sum contribution of $70,000 to cover five years.

If you'd rather not bother keeping track for gift tax purposes, you can make gifts for medical, dental, and tuition expenses for as many relatives (or friends) as you'd like so long as you pay the provider directly. These gifts don't count towards any of the limits.

Own a business?  Owners can transfer limited partnership interests to family members reducing their taxable estate. Since the limited partners cannot control investments or distributions, they may be eligible for valuation discounts at the time of transfer.

Professionals can help you make gifting decisions that are right for you.  Before acting, it is best to consult with your attorney, tax advisor and financial planner in an effort to maximize your gifting and reduce taxation.

Craig ChildressCraig Childress is president of Oswego Wealth Management, Inc., a Registered Investment Advisor offering financial life planning and investment advice.  Securities offered through LPL Financial. Member FINRA/SIPC.  Oswego Wealth Management, Inc. is a separate entity from LPL Financial. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Oswego Wealth management and LPL Financial do not provide tax advice or services. Please consult your tax advisor regarding your specific situation.

Oswego Wealth Management Inc.

5285 Meadows Rd, Suite 355

Lake Oswego




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