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If you’re planning to use your estate to make gifts in Florida, you need to know about the tax implications of gifting and your estate and how to leave gifts to your heirs and beneficiaries without paying taxes. If you think you will need to use Medicare or Medicaid to pay for your medical or care expenses in the next five years, your gifting strategy will need to take this into account.

The Annual Gift Tax Exclusion in Jacksonville

The annual gift tax exemption is $14,000. That means you can give someone up to $14,000 directly without having to file a gift tax return to the IRS. That’s not $14,000 altogether; it’s $14,000 per person. So, if you have three children, you can give each child $14,000 in cash, without filing a gift tax return. Married couples can give up to $28,000 in cash.

But what if you want to give more than $14,000? Perhaps your daughter needs $60,000 for a house down payment, for example. You can go ahead and give the $60,000, and you’ll have to file a gift tax return with the IRS. However, you won’t pay taxes on that money. Here’s why.

The Lifetime Unified Gift Tax and Estate Tax Exemption

The lifetime unified gift tax and estate tax exemption is the amount of money the federal government allows you to give, whether as a gift during your lifetime or through your estate upon your death, without paying gift tax. That amount is $5,490,000 for a single person, and $10,980,000 for a married couple.

The state of Florida does not impose a separate inheritance or estate tax, nor does it impose a gift tax. So, when planning your estate and gifting strategy in Florida, you only have to worry about federal limits and taxes.

So, When Do Gift and Estate Taxes Kick In?

If you give a gift under $14,000, you don’t have to file a gift tax return with the IRS, and the amount allotted to you under the lifetime unified gift tax and estate tax exemption remains untouched. As long as you restrict each gift to an individual to $14,000 a year or less ($28,000 a year or less if you’re gifting as a married couple), you still retain the right to pass on the full $5,490,000 through your estate at your death.

If you gift someone more than the $14,000 annual limit one year (or more than the $28,000 limit for married couples), you’ll file a federal gift tax return and the excess will be deducted from your lifetime limit of $5,490,000. So, if you give your daughter the $60,000 for her house down payment, and you file your gift tax return, the IRS will deduct the excess – $46,000 – from your lifetime limit, and you’ll still be able to pass on $5,444,000 when you die, free of inheritance or gift tax.

So, when do you start paying gift taxes? Not until your gift-giving in excess of the annual gift tax exclusion plus the amount you pass on in your estate exceeds $5,490,000. So, you won’t pay any gift taxes ever, even if you exceed the annual gift tax exclusion multiple times, as long as your combined lifetime gift-giving and the value of your estate doesn’t exceed $5,490,000. Nor will you pay any estate taxes unless the combined value of your lifetime gift-giving in excess of the annual gift tax exclusion and your estate exceeds $5,490,000.

Gifting and Your Estate Plan

So, how does gifting fit into your estate plan? You may want to consider carefully whether you want to give gifts while you’re still alive, or have them distributed through your estate when you pass away. If you give the gifts while you’re alive, you’ll have the pleasure of watching the recipients enjoy them.

You may also want to go ahead and give gifts right away if the recipient needs the money urgently, such as to pay for a home purchase, fund a wedding, pay for education, or pay off medical bills. Keep in mind that gifts you have given within the past five years might still be considered available assets for Medicaid planning purposes.

However, if you make a bequest during your lifetime, you won’t be able to access those assets or funds later if you need them to cover medical expenses or other bills for yourself. Bequeathing assets in your will leaves them available to you should you need them later. Waiting until you have passed away to bequeath your assets could also spare you the anxiety of watching your loved ones make use of your property or assets in ways that you may not approve of – because you may not be able to control how your loved one makes use of your gift once it’s in their possession.

One way that you can give gifts while you’re still alive without impacting your lifetime gift and estate tax exemption is by paying bills on your loved one’s behalf. For example, you can pay for your child or grandchild’s education by making payments directly to the college or university in which they’re enrolled. There’s no limit on the amount of money you can gift this way, as long as you pay it directly to the school. You can do the same thing to pay for a loved one’s medical bills, by paying the money directly to the provider. Gifting in this manner also ensures that your gift will be used in the manner which you intended.

If you want to make a gift while alive, you may want to talk to our estate planning attorneys about setting up a living trust. A trust can allow you to distribute the assets when and how you wish. Some kinds of trusts could help with Medicare planning by removing the funds and assets you wish to leave to your heirs and beneficiaries from your available assets. Trusts can also allow you to protect your gift from a divorce, creditors, or the beneficiary’s poor spending habits. Some kinds of trusts will allow you to still have access to the assets therein while you’re alive.

Contact the Attorneys of Beller & Bustamante, P.L., Today

Thanks to recent changes in estate tax and gift tax laws, Floridians now have much more leeway to gift assets through their estates. Our attorneys can help you come up with an estate plan or gifting strategy that’s right for you and your family.

The attorneys at Beller & Bustamante, P.L., have the knowledge and experience you need on your side to navigate situations like these. To schedule a consultation, call us today at 904-288-4414 or use our online contact form to set up an appointment.