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Gifts Can Lower Estate Tax

Gift tax laws can help reduce your estate and income tax bills by using the annual gift exclusion each year. For 2013, you can give up to $14,000 apiece to a child, grandchild or other person without any gift tax consequences. If you are married, your spouse also can give $14,000, so each recipient can get up to $28,000 free of gift tax.

This annual exclusion beats the estate tax. The gifts aren’t added back into your taxable estate, unlike larger gifts, and all future appreciation on them is excluded from your estate.

You can also use your gift tax exclusion on real estate like a vacation home. You can give fractional shares in real estate to your kids each year until you have given away 100% of the property. If each share is worth less than $14,000, there’s no gift tax and the portion given away is out of your estate. To be safe, get an appraisal of the property before making gifts.

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January 8, 2016

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