13. Transfer Tax Planning and Management

Once an individual has accumulated wealth, their motivations in the financial planning process turn to not only how to protect or defend this wealth, but also how to distribute it. For this reason, this chapter explains gifts and the advantages of making gifts in transfer-tax planning and management. Many individuals think that transfer tax (gift and estate tax) planning is only relevant for very high-net-worth taxpayers, but this is not really true. For example, did you know that you can give away $14,000 per year, regardless of the amount of your net worth, to donees without having to file a federal gift tax return, IRS Form 709? Just as important, did you know that once you exceed this $14,000 limit, you are required by law to file a federal gift tax return? Yes, you will also have to include Christmas gifts on that tax return if you have given away the full $14,000 limit earlier in the same year.