Working with a knowledgeable estate planning attorney can help you minimize your gift and estate tax obligations with strategic planning.
We encourage many of our high net-worth clients to use a strategic gifting program. This means they utilize $15,000 annual exclusion gifts and make sure they make these gifts every year to their children, grandchildren and other beneficiaries. Other gifts that can be made without the need to pay gift tax or file a gift tax return include: (1) paying K-12 private school tuition directly to educational institutions; (2) paying college or university tuition directly to schools; (3) directly paying medical expenses to medical providers; (4) directly paying someone’s health insurance to an insurance company; and (5) the direct payment of some extracurricular activities and camps that qualify.
Section 170(b)(1)(A)(ii) of the Internal Revenue code explains that if you wish to pay another person’s extracurricular or camp expenses and have them not be subject to gift tax constraints, the educational organization must maintain “a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.” In the past, the IRS has approved tuition paid to a martial arts academy and a wilderness training camp that complied with these guidelines. This area of law is very fact-specific, and we recommend speaking with an accountant or an attorney to see if an expense qualifies.