Q:

Are some assets better to gift than others?

A:

Well, from an estate planning perspective, it’s always better to give away low basis assets which have potential for high appreciation. The problem from an income tax perspective is, in the hands of the donee, they have a low basis. Thus, if they ever sell those assets, they’re going to have a lot of capital gains tax to pay. Maybe the best asset to give away would be a high basis but potentially appreciating asset so in the hands of the donee, they’ll have less capital gains tax to pay if they ever sell it. Money’s an easy one to give away. A dollar is worth a dollar. Real estate? Well, real estate has to be valued. An interest in a business? That has to be valued as well. If it exceeds $14,000, then, of course, a gift tax return will need to be filed.

Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.

Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values