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I Gifted More than $15,000. Now What?

Taxes Estate Planning

You may have heard (maybe from me) that you can gift up to $15,000 per year per donor per gift recipient. You do have to make sure that the gift is a gift of a present interest. A gift of a present interest means the recipient can use the funds immediately. As long as you meet the requirements, you don't have any requirement to do anything with the IRS. No filing. No nothing.

What if you don't meet those requirements? Well, then the IRS wants to know. You'll let them know by filing a Form 709. The form is due on April 15th of the year after the gift was made. Just like your income tax return. And just like your income tax return, you can file an automatic extension (Form 4868) and extend the due date until October 15th.

The form isn't too complicated. For most gifts you list who received the gift and how much the gift was. Then you run some calculations to determine if the gift is taxable. For most of us, that won't be the case as the lifetime gift-tax exclusion is in excess of $11M. And in case you were wondering, the gifts under $15,000 that you don't have to report, don't count towards this limit.

There is another part of the form that you need to complete. You need to list and total all previous taxable gifts to determine if you've exceeded the lifetime limit. When you pass away your executor will need this information to determine if any of your estate is taxable. This is because taxable gifts reduce your estate tax exemption. So, you'll want to keep your Forms 709 indefinitely.

 If you look at a Form 709, you'll notice sections for "Direct Skips" and "Indirect Skips". These sections are for the Generation Skipping Tax (Yes, there is such a thing). The Generation Skipping Tax is pretty complicated and we'll pass on that for this article.

One last note. None of this applies in regards to gifts to your spouse. The IRS considers a married couple a single economic entity so there is no limit to gifts to a spouse. I hope my wife reads this blog post...


If you liked this blog article, you might enjoy the following blog posts:

Military Finances 101: Inheritance and Estate Taxes. Do You Know the Difference?


Military Finances 101: Understanding Gifts and Gift Taxes


What Military Officers Need to Know about TSP and Estate Planning





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