The purpose of this post is to advise you that you may be required
to file a Federal gift tax return (IRS Form 709). If you made a gift during
2018, the below summary may be critical to your tax planning.
The due date for a 2018 gift
tax return is April 15, 2019, the same due date as your 2018 individual income
tax return.
This date can be extended by extending the time to file your individual income
tax return using Form 4868 or Form 2350. This due date can also be extended by
filing a Form 8892 to request an automatic 6-month extension if you do not
request an extension for your individual income tax return. However, neither of
these methods will extend the time to pay gift or GST taxes due.
Outright Gifts of Cash or Property
All gifts of cash or property (in excess of $15,000) to an
individual other than a spouse requires a gift tax return. As a result of the
gift, your lifetime estate and gift tax exemption will be reduced by the value
of the gift that exceeds the $15,000. However, no gift tax will be due with the
return unless you have fully used your lifetime estate and gift tax
exemption.
Gifts of Cash or Property in Trust
When you gift cash or property to a trust, including a life
insurance policy or premium payments to be made on a life insurance policy, you
are making a gift to the trust’s
beneficiaries. If the gift to the trust beneficiaries does not exceed $15,000
per beneficiary, and Crummey notices are properly used, a gift tax return may
not be required unless the trust is structured as a generation-skipping
transfer (GST)
tax trust. If a gift is made to a GST trust, it may be advisable to allocate
the donor’s
GST exemption to the trust. While this allocation is automatic, it is advisable
to either opt out of the automatic allocation rules for record keeping
purposes, or, file a return showing the allocation of the GST Exemption. If a
gift to a trust exceeds $15,000 per beneficiary, a gift tax return is required
to be filed.
Most CPA’s are willing and able to prepare gift tax returns.
However, many prefer not to due to the complex rules that apply to the
allocation of GST exemption and other special disclosures. Due to such
complexities, we prefer to review all gift tax returns prepared by our client’s
accountants to ensure they align with your estate planning goals.
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