The Rules for Splitting Gifts

11:05 pm Estate Planning, Tax Planning

gift e1324076682161 The Rules for Splitting GiftsWith everyone in a gift-giving frame of mind this time of year, it’s good to revisit the rules when it comes to gift splitting.

Not the kind of gift splitting that perhaps bedeviled you in your youth, when you had to share gifts with siblings.  We’re talking about gift splitting for tax purposes.

Married couples use gift splitting to double their gift tax exclusions, by making joint gifts to third parties.  Here are a few basic rules:

  • The gift must be made to a third party
  • Both spouses must be U.S. citizens or residents
  • Spouses must be married to each other at the time the gift is made
  • If a gift is made jointly, then the spouses divorce that same year, they cannot remarry and still enjoy the tax benefits of gift splitting
  • Both spouses must agree to the gift splitting
  • The spouse who makes the gift cannot give their consenting spouse power of appointment over the gift

Generally speaking, once a couple elects to gift-split during the year, all successive gifts that year must also be split.  There are some ways around this, which your estate planning attorney can explain.

Also, for GST tax purposes, if gift splitting is elected for the tax year, the deemed allocation rules for the GST exemption will be applied equally to each spouse unless both spouses file a gift tax return that allocates the exemption differently.

Your California legal and financial planning experts are at your service; Contact us today.


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