If you are planning on giving a home to your children or paying for a grandchild’s education, you may be concerned about the gift tax. The good news is that gift taxes don’t usually affect most people, although there are several key issues to keep in mind before you make a large gift.
What You Need to Know About Gift Taxes in New York
New York state doesn’t actually have a gift tax, although you may end up reporting high dollar amount gifts to the federal government. A federal exemption allows you to gift up to $15,000 worth of assets per person every year. If you go over that amount in a single year, you need to fill out a gift tax form to disclose what amount was gifted.
The good news is that in many cases you still won’t pay any extra tax, because there is also a lifetime federal gift tax exemption that currently sits at $11.7 million. Those exemptions will more than cover the average person’s gifting throughout their lifetime, but if you are concerned about the tax implications of going over either threshold, you should speak with an experienced asset protection attorney. It’s important to remember that the exact dollar amount for these exemptions change over time as tax laws are modified at both the state and federal level.
Other Potential Pitfalls
While you won’t normally pay any gift tax, there are other potential pitfalls involved when directly giving away property or cash. Gifts made within three years of a person’s death are still calculated for estate tax purposes, so gifting assets when your health takes a turn may not be the best choice.
Gifting can also cause unforeseen problems in the future, especially if you eventually need to get assistance from Medicaid to cover an expensive nursing home stay. In many cases, placing assets in a trust can be a better option than directly giving them away, both in terms of asset protection and in having more control over how the assets are used.
Talk to an Experienced Attorney Before Making any Significant Gifts
Protect what you’ve worked hard to earn by consulting an asset protection attorney before making any financial moves like gifting. Get in touch with Alatsas Law Firm and set up a consultation to discuss options tailored to your specific family situation and financial circumstances.