If you’ve decided to financially help a loved one, whether that be supporting a grandchild through college or paying a portion of the medical bills incurred by a sibling, it’s imperative to understand the taxes on these transfers. Unfortunately, many people are unaware of Gift Taxes, meaning you may be in for a surprise when gifting money. If you’re unfamiliar with these taxes or how to avoid them, you’ll want to keep reading. The following blog explores what you should know about these complicated taxes and the importance of discussing your options with a Medina, Ohio estate planning lawyer to explore your options.
What Is the Function of the Gift Tax?
Gift Taxes are a tax on assets, typically money or property, that is given from one person to another without the recipient paying the full value of the asset. For example, if you decide to leave your child a vacation home valued at 1.5 million dollars in exchange for $100,000, the Internal Revenue Service would consider this a gift, as the value of the home is significantly more than what you are obtaining in exchange. As such, you would be taxed on this transfer as it is considered a gift.
In 2025, the Gift Tax has increased to $19,000. This means you can gift up to $19,000 per recipient annually without facing any taxes on these transfers. However, if you exceed this limit, you can be taxed as a result. Additionally, the lifetime gift amount is now set at $13.99 million. As such, any time you exceed the annual limit, the amount by which you went over the tax will be counted toward your lifetime exemption.
The main reason that the federal government enacted the Gift Tax was to prevent the wealthy from gifting all of their assets before their death to avoid the federal estate tax imposed after they have passed. As such, this ensures that those gifting assets do pay taxes before they pass.
Is It Possible to Avoid Gift Taxes in Ohio?
Generally, the easiest way to avoid the Gift Tax in Ohio is to adhere to the annual tax limit. However, in circumstances where this is not possible, such as paying for a loved one’s education or medical care, you may be able to explore other options. For example, you can make direct transfers to the institution without giving the funds directly to your loved one to use.
However, you may be able to utilize things like Trust Funds if you anticipate exceeding this limit. By placing the asset in a Trust Fund, you are technically removing the assets from your estate, and therefore, you will not have to incur taxes on this transfer.
As you can see, gifting assets can be incredibly complicated. It’s imperative to understand that working with an experienced estate planning attorney is in your best interest during these matters, as navigating the rules regarding these matters can be incredibly complicated. That is why the team at Krause Law is ready to fight for you. Our firm understands how difficult it can be to determine what is right for your family and assets, which is why we can examine your circumstances to help you. When you’re ready to begin, contact us today to learn how we can assist you.
