Gifting is an estate-planning tool that helps to reduce the value of your taxable estate and reduce probate costs and legal fees upon your death.
In 2016 you can gift up to $14,000 per person, per year without being subject to gift taxes. The amount is indexed to inflation and does change periodically. This annual gift can be given to family members, friends, or anyone else as long as the amount gifted is less than $14,000 per person. Any gift greater than that amount may be subject to gift taxes and will require you to file a gift tax return.
Some people think that this tax rule also allows them to make gifts that will not be counted if they need to apply for Medicaid benefits to pay for nursing home care. This is NOT TRUE. ANY gift you make could interfere with Medicaid eligibility. If you have concerns about Medicaid eligibility, see an attorney before making any substantial gift.
As a gift to my son, I paid his college tuition. Does this count towards the $14,000?
No. Any money paid directly for someone’s school expenses or medical bills is exempt from federal gift taxes. You can still give your son an additional $14,000.