2015 Year-End Estate and Gift Planning


Volume 5 • Issue 12 • December 2015

The Counselor is a monthly newsletter of Hallock & Hallock dedicated to providing useful information on estate planning, business succession planning and charitable planning issues. In this month’s issue, we will look at some year-end planning considerations. If you are interested in learning more about the ideas and processes discussed in this newsletter, please contact us for an initial consultation.

With the end of 2015 rapidly approaching, many will be making gifting decisions as part of their overall estate plan. Here are some things to remember.

Annual Gift Tax Exclusion

In 2015, the Annual Gift Tax Exclusion amount allows each person to give away up to $14,000 per person/per year. This Annual Gift Tax Exclusion amount is scheduled to stay the same in 2016. The gifts can be in cash or in kind. This amount can be given to as many people as you want in a given year. A husband and wife jointly can give up to $28,000 per person/per year. In order to count, the gifts must be of a present and immediate interest. Gifts of a “future interest” do not qualify for the exclusion. The amount is cumulative and includes all gifts given to an individual during the year. Thus paying a $4,000 debt, giving a birthday present worth $1,000 and then a year-end cash gift of $14,000 would mean total gifts of $19,000. The gift amount in excess of the annual exclusion will require the filing of a gift tax return and the use of a portion of the Lifetime Gift Tax Exemption. Rather than cash, you should consider gifts that can be discounted and that have a higher likelihood of future appreciation. Such gifts are far more beneficial in avoiding future estate taxes.

Lifetime Gift Tax Exemption

The Lifetime Gift Tax Exemption is the amount of non-charitable gifts a person can give away over his/her lifetime without paying a gift tax. These gifts will also reduce the amount of available Estate Tax Exemption at death. The Lifetime Gift Tax Exemption for 2015 is $5.43 million. That number will increase to $5.45 million in 2016. In certain instances it can make great sense to use some or all of your Lifetime Gift Tax Exemption to avoid future appreciation of an asset. It is important to remember, that lifetime gifting transfers the giver’s tax basis in the asset as well and as a result such transfers will not receive a stepped-up income tax basis at death.

Gifts for Medical and Educational Expenses

Gifts for medical and educational expenses are not subject to the gift tax so long as payment is made directly to the medical or educational institution. In order for an educational organization to qualify, it must be “one that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.” In addition, to qualify for the Educational Exclusion, the payment can only be for tuition. Payments for books, supplies, room and board, etc. do not qualify.

Medical expenses must be paid directly to the provider and must be for medical care that is deductible for income tax purposes. The Medical Exclusion does not apply to amounts that are reimbursed by the recipient’s insurance.

529 Plans

Another great gifting opportunity is presented by 529 College Savings Plans. Contributions to these plans qualify for the Annual Gift Exclusion and up to five-years of exclusions can be used in one year. This would allow for a lump sum of $70,000 tax free gift in 2015.

Gifts to Charities

If you wish to give to a charity, make sure that the charity is a qualified charity. Unfortunately, the season of giving can also be the season of fraud. Check with the IRS at http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check to find out if you are dealing with a qualified charity. Additionally, make sure you keep a record of any donations.


As you consider the need for year-end gifting and the prospective beneficiaries of your generosity, be wise in your approach. Excess gifts could result in tax liabilities, ill-considered gifts may not provide as much tax benefit, and gifts to irresponsible parties may be squandered. Lifetime gifting can be an important and valuable part of any estate planning strategy if properly planned and followed through.

This Newsletter is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.