MSU Extension discusses how gifts can be living legacies

With the holiday season comes the idea of giving gifts, and, according to Montana State University Extension, gifting an asset can be not only a great opportunity to express love and affection but also an opportunity for the gift to become a living legacy. Children and grandchildren could have the opportunity to participate in the management of a family business or could finance their education using assets gifted from family members.

According to Marsha Goetting, MSU Extension family economics specialist, the types of property that can be living legacies include almost any item with monetary value. Examples include real estate, stocks, bonds, mutual funds, certificates of deposit, U.S. savings bonds, cars or trucks, livestock, and cash. 

“Giving away assets may sound simple at first, but federal gift tax laws should be followed to avoid potential problems later,” Goetting said. "While Montana does not have a gift tax, the federal government levies one upon transfers of real and/or personal property made during life if the person making the gift does not receive something of similar value in exchange.”

For example, if a father gives his son land with a fair market value of $100,000, the father has made a $100,000 gift. If the father sells the same land to his son for $1,000, he has made a gift of $99,000, the difference between the fair market value and the value received.

Federal law permits an annual exclusion of up to $15,000 on gifts below which payment of gift tax is not necessary, Goetting said. The recipients do not have to be family members and no gift tax return needs to be filed for gifts up to $15,000. 

“The gifts can also be used in other efficient ways,” Goetting added. “A grandmother in Billings gifted $15,000 to her adult granddaughter. The granddaughter split up the gift by putting portions in Montana Medical Care Savings Accounts, an IRA and a Montana First Time Home Buyer’s Account. In doing so, the grandmother’s gift saved her granddaughter $1,635 in state and federal income taxes.”

A copy of the MontGuide “Gifting: A Property Transfer Tool of Estate Planning” is available at https://store.msuextension.org/publications/FamilyFinancialManagement/MT199105HR.pdf. Physical copies are also available at local MSU county or reservation Extension offices.