Spouses Should Be Aware of ‘Gift-Splitting’ Criteria when Gifting Assets
by Frank L. Brunetti on August 26, 2013
Lawmakers' decision to both set the estate tax at $5.25 million for 2013 and increase the
annual gift tax to $14,000 has been a welcomed sigh of relief for many affluent
individuals and business owners. The gift tax, in particular, has historically been a key
strategy Americans have used to transfer wealth to future generations and lower their
taxable estate or tax liability.
Couples who file jointly have the added advantage of doubling the amount they can gift
to individuals at a tax-free rate, enabling them to extend $28,000 in cash or assets to
loved ones. However, when one spouse chooses to extend a gift to another person, a
scenario known as "gift-splitting" should be discussed to help them avoid federal gift
taxes. Gift-splitting works as follows: If an individual or their spouse makes a gift to
someone else, that gift can be considered for tax purposes as having been made half by
the gifter and half by his or her spouse.