Reviewing Gift Tax Return Estate Planning Basics

Your estate may need to file gift tax returns even when gift taxes aren’t due. The IRS is cracking down on failures to file gift tax returns, with help from state databases. The IRS is checking state records of real estate transfers and matching those with gift tax returns, or the lack of them. Over 500 people in 15 states are in some level of audit or review on this issue.

The Estate Planning rule is when a gift exceeds the annual gift tax exclusion (currently $13,000), a gift tax return has to be filed. The IRS wants you to file the returns for several reasons. With an asset like real estate, it might decide to challenge the value put on the property, claiming it is worth more than reported. The IRS also wants the gift on the record, because gifts exceeding the annual exclusion reduce the lifetime estate and gift tax credit. When the donor dies, the estate tax credit is reduced by the amount of the gift tax credit that was used.

RW April 2011.

Bob Carlson is the and estate planning specialist and the editor of the monthly newsletter, Retirement Watch, the monthly video series, Retirement Watch Spotlight, and a weekly free e-letter, Retirement Watch Weekly. In these, he provides independent, objective research covering all the financial issues of retirement and retirement planning.

Mr. Carlson, is also Chairman of the Board of Trustees of the Fairfax County Employees’ Retirement System, which has over $2.8 billion in assets, and has served on the board since 1992. He was a member of the Board of Trustees of the Virginia Retirement System, which oversaw $42 billion in assets, from 2001-2005.

Carlson is an attorney. He received his J.D. and an M.S. (Accounting) from the University of Virginia and received his B.S. (Financial Management) from Clemson University and passed the CPA Exam. He also is an instrument rated private pilot. He is listed in several recent editions of Who’s Who in America and Who’s Who in the World