Estate Planning

Year End Gift Checks - make sure you do it right

By Gregory Herman-Giddens

Many people are aware that they can give any number of other people up to $13,000 per year under the federal gift tax annual exclusion (IRC Section 2503(b)).  Staying under this number means that no gift tax return has to be filed and that there will be no reduction in the amount that can be passed free of estate taxes at the donor's death.

However, writing gift checks to children, grandchildren or others at the end of the year can cause the donee lose the benefit of the annual exclusion unless:

• The check was paid by the drawee bank when first presented for payment;
• The donor was alive when the check was paid by the drawee bank;
• The donor intended to make a gift and delivery of the check was unconditional; and
• The check was deposited, cashed or presented in the year for which completed gift treatment is sought and within a reasonable time after issuance.

Bottom line:  make sure your donee deposits the check no later than the last business day of the year.

Example: Bob gives his $13,000 gift check to his granddaughter Lucy on Christmas Day, 2009.  Lucy deposits the check in her bank on December 31, 2009.  The check is paid by the drawee bank on January 7, 2010.  This would be completed gift for Bob in 2009.

Full post as published by North Carolina Estate Planning Blog on November 19, 2009 (boomark / email).