Forums Support Library KEA – Kugler Estate Analyzer™ Annual Exclusion Gifts

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    • Kathleen Reynolds
      Post count: 428

      Annual Gifts

      In 2023, donors can donate $17,000 worth of gifts to any number of persons or parties each year, tax free. This allows taxpayers to make many small gifts without recording or reporting them. The maximum amount that may be excluded is calculated by multiplying the number of persons given gifts by the annual exclusion amount. The annual exclusion amount may change each year.

      If the donor is married, his spouse may sign the donor’s gift tax return as an indication that each spouse donated half the gift, even if the gift was actually donated by one spouse. Therefore, the per-donee exclusion increases to twice the annual exclusion amount.

      An annual exclusion is permitted only for present interest gifts. A gift is considered present interest when the person receiving the donation has immediate possession or use of the gift when it is made. A future interest gift is one in which the possession or use of the gift is detained by a specified time after the gift is made. Future interests include reversions and remainders.

      Single transfers are sometimes two gifts that have to be separated for tax purposes. One gift may be a present interest that qualifies for the annual exclusion, while the other gift may be a future interest that does not qualify for the annual exclusion. For example, a donor puts $15,000 into a trust with a 12% interest rate. His son receives income annually from the trust for 10 years; his daughter is paid the remainder at the end of the 10 years. The son’s income payments begin immediately; therefore, the gift is a present interest gift and qualifies for an annual exclusion. The daughter will not receive the remainder for 10 years; therefore, the gift is a future interest and does not qualify for an annual exclusion.

      Click the Edit button to set the specifications of the Annual Exclusion Gift:

      • The name of the Outright Gift
      • To select the asset to use to fund this technique, click the ‘+’ button.
      • Verify the amount listed as Principal
      • Amount of Gift Per Year Enter the full gift amount for the year.  This includes portions that are not included in the annual exclusion amount.
      • Enter the number of donees Enter the number of people receiving a gift
      • Annual Exclusion Used Enter the annual amount of exclusion used on each donee.  For 2023, the maximum is $17,000.  Clicking on the computer icon will calculate the maximum amount of exclusion used based on the number of donees and the maximum exclusion for the year.
      • Minority Discount Enter the minority discount to be applied.
      • Years of Gifting Select an option to set the number of years that the gifting will occur.
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