The word gift was first used in the 12th century (1101-1200) with words like She, Heron, countess, crown, birth etc.
What is a gift? It is something given without compensation. (Merriam Websters dictionary)
Instant wealth with a gift can be many things: talent, flowers, a hug, smile, car, boat, clothes, AND it can be something monetary.
Each country has its own system of gift tax on monetary received usually it depends on the degree of family relationship. In the United States after the Revolutionary war congress was given the power under the constitution to impose taxes. The gift tax, estate tax and social security was first created in 1920 – 1930’s.
What size gift can be given without tax implications?
Today 2020 the gift exemption (exclusion) is limited to $15,000 per person per year. If more is given there is a gift tax return due. Form 709 needs to be filed by the donor no later than April 15, in 2020. This form can be extended to July 15, 2020. Other extensions can be for 6 months and can be filed on April 15, for October 15.
Gift tax returns for values over $15,000
Note: When you give value of over $15,000 like a brand new car for graduation + Christmas gifts +birthday you have more than used up you $15,000 exemption (exclusion) and you need to do a gift tax return the year you gave the gifts.
What to do when you’re given a large monetary gift?
Let’s say you now have received $15,000 or more in cash and you wonder what you should do with it and what is the best use. Don’t forget to say thank you for this wonderful gift!
Let’s look at some thoughts about what you can do :
- Emergency fund
- Pay off your credit cards
- Pay off medical bills
- Go on vacation
- Donate to your favorite charity
Think about money received as a gift and check out what would give you the most for the money: your “bang for your buck.” \
About the Author:
Lillian Meyers CFP®, CDFA®, EA is a financial planner in Sonoma, California helping clients with wealth events, planning for retirement, loss of a spouse or divorce. She has decades of experience assisting clients in living their best retirement life through the use of financial planning, investment management, and other sophisticated financial options.