Family Gifting and Physician Loans

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Physician Gift and Estate Planning

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™ 

The annual gift tax exclusion allows the physician, and others, to give any individual $13,000 per year [$26,000 per couple in 2009] without paying or filing a gift tax return. 

There is no limit on the number of individuals who might benefit from your generosity.  


If you are married, then you and your spouse together may gift to any number of individuals.  The recipients do not owe any tax on the money either.   

Excess Gifts 

Gifts in excess of $12,000 are subject to current gift tax.  A gift tax return must be filed by April 15th of the year following the gift.  Gifts to qualified charities are subject to a different set of income tax rules. 

Lifetime Gifting 

Gifting assets to family members or others during your lifetime can be an effective estate planning technique.  A gift of money or stock to your children automatically reduces your estate. 

If your taxable estate is in excess of $2 million, then you are in the [45] percent estate tax bracket; indexed at $3,500,000 in 2009, with repeal of the estate tax and generation-skipping tax scheduled for 2010. 

This means that each dollar you can remove from your estate, and allow to appreciate in your children’s estate can help reduce a significant potential estate tax liability.   

However, if the sole purpose of gifting is to reduce estate taxes, then the Economic Growth and Tax Relief Reconciliation Act [EGTRRA] of 2001’s reduction, and ultimate elimination of estate taxes, will nullify this technique.   

You must remember that tax laws are always subject to change and EGTRRA has a Sunset provision in 2011, which in some form may not totally eliminate estate taxes.  

Gifting strategies may still be appropriate depending on your expectation of law changes and where the estate is large and life expectancy is limited.  There are gifting traps in these situations, so consult proper counsel. 

Stock Gifting 

When you gift stock you also give the recipient your cost basis. 

For example, if you have low basis stock that you are thinking about selling but are concerned about paying 20 percent in capital gains tax, you could gift portions of the stock to your children (or anyone in the 15 percent income tax bracket) and sell just enough to pay the 10 percent capital gains tax in their bracket.

The gift value is the market price of the stock on date of gift.  We are talking about an outright gift, so before you really do it, make sure you can afford to give up the cash or the asset forever. 


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One Response

  1. Giving Now or Later? [The Tax Facts UPDATED]

    To the IRS, the timing of your generosity makes little difference. The U.S. tax code makes it pretty easy to give your children money, stocks or a piece of the family business—and it doesn’t matter whether you make the gift during your lifetime or through your will. In 2016 you can transfer $5.45 million without gift or estate taxes. (That amount is currently indexed to inflation, so it’s expected to rise in future years).

    You’re also free to give $14,000 annually to as many people as you like without owing current taxes or using up any of the $5.45 million. Plus, all of those amounts are doubled if you’re making a joint gift with your spouse.


    So suppose you and your wife establish a trust for your three children and fund it with shares of your company worth $4 million. You can count $84,000 of that amount as tax-free annual gifts to the three kids (three times $28,000), and use the $5.45 million exemption to cover the rest. You still have more than 1.5 million dollars of your exemption left to reduce or eliminate taxes on any future bequests. And, of course, what you give now will reduce the size of your estate.



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