Insight

To Gift or Not to Gift: ’Tis the Question for the Season!

To Gift or Not to Gift: ’Tis the Question for the Season!

Anthony J. Enea

Anthony J. Enea

December 12, 2018 03:07 PM

With the holidays fast approaching, many of us will be deciding whether to make significant monetary gifts to our children, grandchildren and other loved ones. Some issues often raised in connection with the decision to gift are whether doing so will result in any taxes being paid by the person making the gift (the “donor”) and/or the person receiving it (the “donee”). Another issue that needs to be considered is whether the gift should be made outright or to a trust for the benefit of the donee.

As to the first question regarding taxation of the gifts, a donor can gift up to $15,000 per done per year for the year 2018 free of any gift taxes. The donee is not taxed on the amount of the gift even if it is greater than $15,000. However, if the donor makes any gifts in excess of $15,000 per donee in any calendar year, he or she is required to file a gift tax return by April 15th of the following year.

The fact that a federal gift tax return is required does not mean that the donor will have to pay any gift taxes as he or she will be able to apply his or her federal exemption for federal estate and gift taxes to the amount of any gift above the $15,000 per donee in any calendar year. For example, a single (non-married) donor makes a gift of $100,000 in the year 2018 to his son or daughter, $15,000 of the gift is tax free and $85,000 would be subtracted from the donors’ federal exemption amount of $11.18 million dollars for Federal estate and gift taxes (available through December 31, 2025). If the donor is married, his or her spouse can join in on the gift and then reduce the taxable amount of the gift to $60,000, whereas only $30,000 would be subtracted from the lifetime credit of each donor. It should be noted that New York does not have a gift tax.

The existence of an $11.18 million-dollar federal estate and gift tax exemption, which expires on December 31, 2025 unless made permanent by law, creates a great opportunity for individuals to remove highly appreciating assets from their taxable estate. It is also a way of reducing the assets one owns that may be subjected to one’s long term care costs.

The other issue that needs to be addressed by the donor is whether he or she wants the gift to the donee to be an outright gift that is free of any trust. This is a decision that often requires consideration of a number of factors such as the age of the donee (child or adult), the ability of the donee to appropriately manage his or her financial affairs and whether or not the donee is a spendthrift.

The use of a trust agreement is a prudent way of gifting and managing assets for a loved one. As the trustee of the trust can be given the discretion to use the assets and income of the trust to or for the benefit of the trust beneficiary as delineated in the Trust. The trust can also specify the age or the condition that is a prerequisite for the trust beneficiary receiving the assets in the trust outright. The trust can also have more than one beneficiary.

The assets transferred to a trust will also be protected against any claims the beneficiary(ies) creditors have against them until the time the trust makes a distribution to them. Additionally, one can give the trustee(s) the authority to continue the trust beyond the set termination date if doing so is in the best interest of the beneficiary. The assets in the trust will also not be subject to equitable distribution claims in New York in the event the beneficiary gets divorced. Furthermore, if the beneficiary develops any disabilities during the term of the trust and the beneficiary needs any federal and/or state aid, a properly drafted trust will allow the beneficiary(ies) share to be continued as a Special Needs Trust for the beneficiary, which will not impact his or her eligibility for any federal and/or state programs.

In conclusion, unless one is making a relatively small gift to a donee and there are no concerns as to the donee squandering or wasting said monies, an outright gift may be appropriate. However, in most other instances the use of a trust to hold the gift is a much wiser option. Even the three wise men would have approved of it.

Anthony J. Enea, Esq. is a member of Enea, Scanlan & Sirignano, LLP with offices in White Plains and Somers, NY. Mr. Enea is a past chair of the New York State Bar Association’s Elder Law Section. He was named Best Lawyers’ 2019 Trusts and Estates “Lawyer of the Year” in White Plains and Westchester County’s Leading Elder Care Attorney at the Above the Bar Awards. Mr. Enea can be reached at 914-948-1500 or A.Enea@esslawfirm.com.

Related Articles

The Benefits of Charitable Giving in New York Estate Planning


by Best Lawyers

In this article, Best Lawyers breaks down the advantages and disadvantages of factoring in charitable donations when estate planning in New York state.

Animated hand giving a gift with bow on top

The New PPE


by Jennifer Stavros

How to plan your pandemic preparedness estate—all from the safety of home.

Planning Your Digital Estate Plan

Protecting Your Legacy With Estate Planning


by Tripp Wiles

You're careful with your finances; do you still need asset protection?

Protecting Your Legacy With Estate Planning

A Texas-Sized Reputation


by Justin Smulison

Dan Sciano’s proven record of success and leadership has made him a highly sought-after plaintiff’s litigator in the Lone Star State.

Dan Sciano: Expert Civil Litigator

Is It Time for You to Have the Long-Term Care Planning Talk With Your Parents?


by Anthony J. Enea

How should you talk to your parents about long-term care options? Estate planning can make for a difficult conversation, but wills and trusts are necessary documents for anyone growing older.

Estate Planning for Parents Guide

Most Americans Lack a Power of Attorney for Assets


by George M. Riter

Only 25 percent of American households have estate planning documents in place. A Power of Attorney for Assets will secure your financial affairs should you be unable to do so yourself.

Power of Attorney for Assets Documents

Ellen G. Makofsky, 2018 "Lawyer of the Year" for Elder Law


by Nicole Ortiz

Ellen G. Makofsky of Makofsky and Associates was named 2018 "Lawyer of the Year" in Long Island for Elder Law.

Ellen G. Makofsky LOTY

Anthony J. Enea, 2018 "Lawyer of the Year" for Elder Law


by Nicole Ortiz

Anthony J. Enea of Enea, Scanlan & Sirignano, LLP was named 2018 "Lawyer of the Year" in White Plains for Elder Law.

Anthony J. Enea LOTY

Protect Your Pets: Westchester Elder Law Attorney Anthony Enea Explains How to Provide for Pets in an Estate Plan


by Anthony J. Enea

Along with pet ownership comes the responsibility of ensuring your companion animal's care and well-being - even if that extends beyond your lifetime.

Elder Law - Pets Estate Plan

Trending Articles

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

2021 Best Lawyers: The Global Issue


by Best Lawyers

The 2021 Global Issue features top legal talent from the most recent editions of Best Lawyers and Best Lawyers: Ones to Watch worldwide.

2021 Best Lawyers: The Global Issue

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

The U.S. Best Lawyers Voting Season Is Open


by Best Lawyers

The voting season for the 31st edition of The Best Lawyers in America® and the 5th edition of Best Lawyers: Ones to Watch® in America is officially underway, and we are offering some helpful advice to this year’s voters.

Golden figures of people standing on blue surface connected by white lines

The Best Lawyers in Australia™ 2024 Launch


by Best Lawyers

Best Lawyers is excited to announce The Best Lawyers in Australia™ for 2023, including the top lawyers and law firms from Australia.

Australian Parliament beside water at sunset

How To Find A Pro Bono Lawyer


by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses

How Palworld Is Testing the Limits of Nintendo’s Legal Power


by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

Inflation Escalation


by Ashley S. Wagner

Inflation and rising costs are at the forefront of everyone’s mind as we enter 2023. The current volatile market makes it more important than ever to understand the rent escalation clauses in current and future commercial lease agreements.

Suited figure in front of rising market and inflated balloon

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

IN PARTNERSHIP

Bentley & More LLP: Beacon of Hope


by Bentley & More

With a unique blend of expertise in trial advocacy and workers’ compensation, Bentley & More LLP has established itself as a beacon of hope for injured workers.

Bentley & More LLP: Beacon of Hope for Injured Employees

The Upcycle Conundrum


by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

A Celebration of Excellence: The Best Lawyers in Canada 2024 Awards


by Best Lawyers

As we embark on the 18th edition of The Best Lawyers in Canada™, we are excited to highlight excellence and top legal talent across the country.

Abstract image of red and white Canada flag in triangles

8 Different Types of Criminal Defenses in Law


by Best Lawyers

Learn about the different types of criminal defenses available in law, including innocence, self-defense, insanity and more. Protect your rights today.

Silver handcuffs laying on finger printed papers