Probate and Estate Planning Gift Tax

By Elliott Stapleton

Gift Tax – Form 709

A gift is subject to the federal gift tax with several exceptions. Gifts below the annual exclusion, spousal gifts, direct payments of tuition or medical expenses, and political or charitable gifts are not taxable.[1]

A separate annual exclusion applies to each donee. This allows a donor to give up to $14,000 (2015) per donee without tax penalty.

Spouses who make joint gifts may treat the gift as being made one-half by each spouse.[2]  Therefore, married couples may give up to $28,000 (2015) to a single donor in a year. Both spouses must consent to gift splitting.

Taxpayers must file Form 709 for gifts worth more than the annual exclusion, gifts not subject to the annual exclusion, a gift of a future interest, or a spousal gift of an interest in property that will end with some future event. No return is required for gifts of tuition, medical expenses or to a political organization.[3]

Charitable gifts need not be reported if they constitute the donor’s entire interest in property or a qualified conservation contribution. Copies of appraisals, documentation of unusual items, and other relevant documents should accompany the return.

Coordinating with Decedent’s Accounting or Investment Advisors

The executor, administrator or other personal representative is responsible for managing and investing estate assets until distributed. Representatives lacking accounting or financial experience should seek professional help from the decedent’s accounting or investment advisors.

An investment advisor can help manage and structure an investment portfolio, decide what assets to liquidate to pay estate expenses, and minimize tax liabilities. An accountant may be a good source for the decedent’s financial records or assistance with filing an inventory or accounting.

The need for such services depends on the complexity of the estate. The drawback is increased costs of estate administration. The representative should contact these advisors early to seek information related to tax returns, assets, and financial records.

If the representative lacks knowledge, it is wise to seek out help to avoid personal liability for mismanagement. Under the Uniform Prudent Investor Act, trustees must exercise reasonable care and manage assets as a prudent investor would.

Simply maintaining the decedent’s investments is not a defense to an heir’s claim of mismanagement. Advisors can aid in developing a written investment policy that is not too conservative or speculative. While this Act is not applicable to other fiduciaries such as an executor or administrator, these other representatives still must be informed and invest competently to avoid a breach of their fiduciary duty.

If you have questions on this legal topic, feel free to contact Elliott Stapleton, a Cincinnati Estate Planning and Probate Attorney – (513) 334-0099 123 Boggs Lane Cincinnati, Ohio 45246.


[1] I.R.C. §§ 2501, 2503.

[2] I.R.C. § 2513.

[3] I.R.C. §§ 2501(a)(4); 2503(e).

By Elliott Stapleton

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