Updated: Feb 8, 2023
Giving away Gifts while alive is the best way to save on taxes and avoid probate. Before beginning on this strategy, review the allowance for tax-free gifts in your jurisdiction (country, state or province) where the gifts law is applicable. You will not be able to contribute and at the same time save tax if you plan to make gifts near the end of life.
It means, you may expect big estates (or inheritance, death, disposition) tax bill in the final return of deceased.
Following guides will help on creating your gifts planning strategy in Canada, USA, UK, Australia, India and China.
In a life time, you can give gift up to your net income of the year. After death, if deceased made gift in the year of death, the Executor of the Will can claim lesser of the two item a.Deceased person’s net income in the year of death. b.Eligible Gifts made in 5 years before the year of death. Any access can be claimed in the unused portion of the previous years.
In a life time, you can give gift up to US$14000 PLUS Unified credit eligible amount of the year (This amount changes every year) per person. You can make unlimited gifts to individual, with not exceeding this amount. You may be liable to pay gift tax if you exceeds this amount. There are taxable gifts which exclude tuition payments, medical expense, anything given to Spouse or making gift to political organizations.
In a life time more than 7 years of the death, you can give whatever you want as gift to your spouse, is exempted from inheritance taxes as long as they live permanently in UK. Also no inheritance taxes on gifts with eligible allowances such as Christmas, birthday, living cost to elderly or 18 years under, gifts to charities or political organization etc.
In a life time 7 years before the death, you can give whatever you want as gift to your spouse, is exempted from inheritance taxes if the amount is not exceeding to £325,000 (This amount changes every year). If you exceed amount then 7 years rule for tax slab apply. i.e. Pay 40% tax for less than 3 years, Pay 32% tax for 3-4 years, Pay 24% tax for 4-5 years, Pay 16% for 5-6 years, Pay 8% tax for 6-7 years and no tax for more than 7 years.
In a lifetime, You can gift anything with following conditions then you may be eligible for tax deductible.
Gift must go to NFP (Not-for-profit) that is a deductible gift recipient (DGR).
b.The value of gift must be at least $2 or more and if it is property than the value must be more than $5000 and if it is share then must be between $2-$5000.
If you are gifting property to DGR within 1 year of purchase then you may be eligible for tax deductible.
The property must not be in the category such as raffle winning, art union tickets, low cost items (buying pen, chocolates etc), cost of attending fundraising dinner, membership fees, cost incurred during volunteering, gifts made under Will, gifts vouchers etc. For property gift, you may be able to obtain tax back of amount in between lesser of the cost of property and market value of property on the day gift is donated
In a life time, you can give gift to your relatives with following conditions. a.The gift recipients must be Spouse, Yours or Spouse’s Parents, brother or sister or either of your parents. Yours or Spouse’s lineal descendents. However, if you are gifting other than above mentioned recipients then you will be paying gift tax (based on recipients income tax bracket of the year) if your gift worth Rs.50,000 or more. b.The gift money must be already taxed through payroll or business entities to Indian tax office i.e. you should have explanation where the money comes from.
In a life time, There is no gift tax in China except gift from employers to employee consider as a taxable income.
Disclaimer: Above guide is reference only as the legal laws are very dynamic and it may change at any time.