Tax Tip of the Week
July 10, 2006

Each year, you can make gifts of up to $12,000 each to as many people as you want, free of any gift tax liability. Your spouse has a similar limit, so as a couple you can give up to $24,000 to each person each year.

This gives you a useful way to transfer assets tax-free to someone else, especially if you set up a program of making regular gifts over several years. For example, you can use an annual gifting program —

• as part of your estate plan, to transfer assets to your heirs before your death. A regular gifting program can help to keep the size of your estate below the taxable limit.
• to shift investment assets to a child or other family member who might be in a lower income tax bracket. However, a recent tax change extended the “kiddie” tax to children up to age 18. This may limit the tax savings from this strategy.
• to help fund your child or grandchild’s education. For example, you could make a gift to a child’s Coverdell education savings account.
• If you run up against the dollar limitations, another little-known tax break might help. You can give an unlimited amount to pay for someone’s tuition costs or medical expenses. But you must make the gift directly to the college or institution, not to the beneficiary.

Questions for our Financial Expert?
E-Mail us at: finance@ClevelandSeniors.Com