Elderly people need to have a proper estate planning strategy to ensure they leave all their belongings to the right people after death. However, many people fail to do this. A report from the American Association of Retired Persons shows that only four out of every 10 adults in the United States of America actually have a will.
However, many people want to give away their money and possessions while they are still alive. The term for this is gifting, and it can be an excellent way to give away a fortune over time instead of all at once. For people who want to go down this route, they should gift properly to help prevent the gifts from getting taxed too heavily if at all.
Gifts less than $14,000 annually
Taxpayers can receive gifts less than $14,000 every year without that money getting taxed. However, married couples can get as much as $28,000. Technically, each person gets $14,000, so the total gift can amount to $28,000 without it getting taxed.
Elderly people can transfer money to relatives who currently attend college. In 2016, the amount allowed for transfer in a given year is $70,000. In order for people to transfer this money without it getting taxed, they need to send it as a gift to the university directly. Other charitable donations may be exempt depending on circumstances, such as public libraries, churches and schools.
Death bed gifts
One law to watch out for is the New Jersey law about gifts made “in contemplation of death.” This means certain gifts are subject to taxes if the person gave them within three years of death. In these instances, the state’s inheritance tax most likely applies.
Whether a person is giving or receiving the gift, it is a good idea to speak with an attorney to see if the person needs to file taxes on behalf of the present. It is best to play it safe rather than sorry when it comes to taxes.