Originally created 02/15/02

Loopholes allow people to give and give

Q. I have never understood the gift tax and did a little research. Between the annual credit ($11,000) and unified credit (which appears to be a lifetime credit), it appears one can give a lot more than the $11,000, with only the requirement to file a gift tax return. Is this correct?

A. Absolutely.

The "unified credit" you have learned about is an amount you can give away tax-free, adding together lifetime gifts and bequests made at your death. (That's why they call it "unified.") Currently, this credit is $700,000 per person, increasing gradually to $1-million.

But you can give away much more than that tax-free because of a loophole written into the law. Each year you can give $11,000 to any one person without having it count against your unified credit. That means a husband and wife together can give $22,000 to one person, double that to a married couple.

However, this is far from the actual limit on your annual gifts. If you give away more than $11,000 to someone, you do have to file a gift tax return. But you do not have to pay any gift tax until all the excess gifts added together exceed the unified credit.

That means most people are free to give away huge sums with no gift tax consequences other than having to file forms. There might be other reasons for limiting your generosity, but having to pay gift tax is only rarely one of them.


Q. My brother died without a will. He is survived by two adult daughters who would like to claim the money he had in his bank savings account, about $1,000. What do they need to do?

A. Someone who paid a funeral bill or final medical bills can go to the clerk of the circuit court in the county where the deceased person lived and collect reimbursement without going through the formal probate process. That's because these expenses are a priority claim on the estate.

But if the situation is more complicated than that, a lawyer probably is going to be required to settle an estate, St. Petersburg, Fla., lawyer Louie Adcock said.

Technically you can settle an estate yourself. The problem is that you have go to a law library and copy all the petitions, forms and proposed orders you need, then do the research to figure out how to fill them out properly. Workers in the clerk of court's office are not supposed to give out legal advice.

"It's not because the courts want to create jobs for lawyers," Adcock said. "They don't want to take that responsibility."

Small estates do qualify for "summary administration," a simpler and less expensive version of the process.


Q. I have a revocable trust for which I am the grantor and trustee. My three sons will share equally in the trust. In my will I have appointed two sons as personal representatives. Do they both have to sign every document?

A. There is always the possibility that a bank will not accept a document signed by only one of them. Check with your bank if this is a concern to you. You could also name only one son as the personal representative, with the other named as a backup in the event that the first is unable to serve.

Trust documents may specify that one of the co-trustees has the power to act alone.


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