August 20, 2009
What is a Gift Tax Annual Exclusion?
The Gift Tax annual exclusion in 2009 is $13,000. This allows an individual to gift up to $13,000 of cash property per year to each child (or any other person), free of any gift tax. If you are married, you can gift $26,000 per year, per person tax-free. This could be from your property, your spouse’s or both; the limit is $26,000 in total. Gifts to pay tuition or medical expenses can be in addition to this.
However, this exclusion is not automatic. The gift must be given in such a way as to constitute a “present interest”. A direct, outright gift, or gift in custodianship qualifies. But, a gift in trust will not qualify unless the beneficiary has the right to withdraw the gifted amount from the trust. Even a minor beneficiary must be given the legal right to withdraw, though that right would not be exercised as a practical matter.
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