Ethan R. Okura and
Carroll D. Dortch
Hawai‘i Herald Columnists
From the American tradition of a big Thanksgiving feast to the various religious celebrations at this time of year, gifts and sharing with others are what make this holiday season so special. Unfortunately, many people are not aware that there can be unintended negative consequences for both the giver and the recipient of a gift when proper planning has not been done. There are three main things to think about when making gifts:
• Taxes incurred by the giver and/or the recipient.
• Nursing home Medicaid, Supplemental Security Income and similar resource-based government benefit program eligibility.
• How the gift will affect the lifestyle of the giver and the recipient
Gift, Estate and Capital Gains Tax. When the gift tax was re-enacted in 1932, it wasn’t intended to raise a great deal of revenue for the government, but rather to protect against citizens transferring assets to others in a lower income tax bracket or giving away assets to avoid paying estate tax.
In 1932, you could give $5,000 to any number of people each year without owing any gift tax. This was called the annual exclusion. When adjusted for inflation to 2017 dollars, it would be equivalent to being able to give $82,700 to each person without incurring a gift tax. However, the annual exclusion was only increased to $10,000 in 1981and began to be adjusted for inflation in 1997. The annual exclusion amount is currently $14,000 to any number of people each year.
Ethan R. Okura received his doctor of jurisprudence degree from Columbia University. Carroll (Cary) D. Dortch received his doctor of jurisprudence degree from the University of New Hampshire School of Law.] The lawyers at Okura & Associates focus their practice on estate planning to protect assts from nursing home costs, probate, estate taxes and creditors.
This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.