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Want to Help Loved Ones? Know the Rules

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We’ve seen the headlines: hundreds of thousands of jobs lost, millions have filed for unemployment, the economy is getting slammed. Chances are, someone you know and love is suffering, too. Considering the wide-spread coronavirus damage, you may want to help ease the pain.

If you find that you want to help, there are rules around giving gifts you should think about.

The first step, however, is to very carefully determine whether your own circumstances mean you are in a position to help. Think about your own long-term resources and be realistic about your future income and expenses.

Basics for Helping Out With Gifts

If, after you crunch the numbers, you decide you can help, know the rules. Most people have heard that there are annual limits to gifts. And there are, but they have a tax impact on only the wealthy (which may be the only people who can afford to make gifts right now).

The gifting rules are tied to federal gift and estate tax. You are allowed to give a certain amount during life and at your death. The amount is known as the estate tax exemption. Right now, your total gifting limit is $11.58 million. Each person gets to give this amount, so if you are married, the two of you together have a limit of $23.16  million.

But certain things are excluded – or not counted — against that lifetime limit. That’s where the annual gifting rules come in. You can give a much smaller amount to as many people as you want — not just family members. If you go over that limit, you dip you’re your many-millions-of-dollars lifetime exemption. When you start dipping into your lifetime limit, you are supposed to tell the IRS by filing a gift tax return. But no tax is due until you exceed the limit. The recipient does not have to report the gift or pay any tax.

How the Annual Limit Works

Now, in 2020, the annual excluded amount is $15,000. And, if you are married, each of you can give $15,000, $30,000 total. Imagine you have three struggling kids, and each of them is married with one also struggling adult child. You and your spouse could gift up $270,000 with no gift tax consequences at all and no need for a gift tax return: $90,000 per child ($30,000 for the child, $30,000 for the spouse, $30,000 to the grandchild).

BUT, you can even give more, and there’s no effect on you gift tax-wise unless you exceed your $11.58 million lifetime limit. Say, in the example above, you and your spouse give $40,000 to each person instead of $30,000. The only difference is that you should file a gift tax return and tell the IRS that you used $90,000 of your exemption. The damage to you? The CPA’s fee and a reduction in the amount you and your spouse, combined, can give at death to $23,070,000.

Other Options to Preserve Full Limit

If you want to preserve your entire exemption, there are other ways to help out with gifts that have no gift-tax impact. Among them:

  • Spouses are allowed to gift to each other without any limits at all.
  • Medical and education expenses, if paid directly, are not counted.
  • 529 accounts have special rules; you can contribute up to $75,000 initially and count it as $15,000 gifts over the next five years.

Note that the exemption that applies to you is the number when you die. That $11.58 million is likely to change. In fact, it is set to revert back to $5 million in 2026. But if power in Congress and the White House shifts, the exemption could go down more dramatically, go higher, or be eliminated entirely. So you can’t count on the exemption staying at its current levels.

If You Help Out, Also Consider

If you are generous and want to help out, consider the impact on your overall estate plan. (Now is not a bad time to consider your overall plan anyway.) If you’ve tried to be fair and equal, does helping out change the calculation? Consider whether you want to adjust your estate plan to account for lifetime gifts, so that, in the end, things work out equally.

A few more warnings:

  • If you are gifting a large sum or to a minor child, consider leaving the asset in a trust, which protects the funds from the recipient’s creditors and allows someone besides the recipient beneficiary to control how the funds are invested and used.
  • Be careful about cloaking the gift in loan language, such as providing a “loan” but not ever expecting repayment. Legally, that’s still a gift.
  • Don’t inadvertently gift funds by adding children to your bank account as co-owners. (They can legally take the money.) If you want help with your finances, a power of attorney is the proper arrangement.
  • Be aware that the $15,000 limit is a federal estate and gift tax regime. The rule does NOT apply to other government programs, such as long-term care under Medicaid (ALTCS in Arizona). To qualify for long-term care, you have to have minimal resources, and gifts in prior five years will trigger a penalty. That includes $15,000 gifts excluded under the gift tax rules.

The bottom line is, if you want to help out and find you can, think about the consequences before you open your pocketbook.


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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

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Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.