Gift Tax Planning for Fairfield Residents

Start by separating reporting from tax owed

Federal gift-tax reporting and whether gift tax is payable are distinct questions. The donor is generally responsible for federal gift tax, but the answer for a particular transfer depends on the gift and the rules that apply. A reporting question should not be treated as proof that tax is due, or vice versa.

The practical first step is to make a clear record of what you are considering giving and what you have transferred previously. That gives you a more useful basis for discussing both the transfer and its relationship to your estate plan.

Compare the documents that describe your plan

Before deciding what to change, gather the estate-planning documents that currently express your wishes and any records that describe earlier transfers. Compare them with the proposed gift: who is to receive it, what is being transferred, and whether the transfer appears consistent with the plan you have already made.

This is a preparation step, not a legal requirement. For example, if a proposed gift is intended to carry out a goal described in your existing plan, bring both that plan and the gift details to the discussion. If the documents and proposed transfer seem to point in different directions, identify the inconsistency rather than assuming the gift automatically updates the plan.

• Current estate-planning documents that may relate to the proposed transfer.
• A list or records of earlier transfers, with the recipient and a description of what was given.
• A short description of the proposed gift and the goal you hope it will serve.

Use the right questions for the right decision

For each proposed transfer, ask whether federal reporting may apply and separately whether gift tax may be payable. Then consider whether the transfer fits the intentions expressed in your estate-planning documents or whether those documents may need to be reconsidered. These are related planning questions, but resolving one does not automatically resolve the others.

The IRS directs people with unresolved federal gift-tax questions to a tax practitioner. A legal-planning discussion can focus on how a proposed gift relates to your estate plan; questions about reporting or tax payable should be taken to a qualified tax practitioner when they remain unresolved.

Make decisions with the limits in view

The federal tax result depends on the gift and applicable rules, so a general discussion cannot establish the reporting or tax result for every proposed transfer. Nor does planning coordination itself guarantee tax savings. Keep the proposed transfer and prior-transfer records together, and seek tax guidance for unresolved federal tax questions before relying on an assumption about reporting or tax payable.

A useful next step is to bring your current planning documents, a concise record of earlier transfers, and the details of the gift you are considering. Codi M. Dada Law Office P.C. serves clients virtually throughout California from its in-person office in Novato.