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That is still not correct. If I am worth $10,000,000, I am not subject to federal estate tax, but I am subject to Washington estate tax. If I give my son $1,000,000 today, that money is gone from my bank account. If I die a month later, my executor will
file a Washington estate tax return showing a gross estate of $9,000,000. Period. Nothing to report on any income tax return. Ever.
<div>I am supposed to report the gift on a federal gift tax return if it exceeded $15,000. I am not supposed to report gifts of “up to” $15,000. </div>
<div>If I do not file the gift tax return under these facts, there is little consequence for not having done so, because if there is no tax due, there is no penalty. But that is another whole issue.</div>
<div>But in your case, there is nothing to report on an income tax return, either by the donor or by the donee. Ever.</div>
<div>Phil Jones</div>
<div><br>
<br>
<div dir="ltr">Philip N. Jones
<div>Duffy Kekel LLP</div>
<div>Portland, OR</div>
<div>pjones@duffykekel.com</div>
<div>(503) 226-1371</div>
</div>
<div dir="ltr"><br>
<blockquote type="cite">On May 15, 2020, at 4:27 PM, Susan Donahue <sdonahue@sdonahuelaw.com> wrote:<br>
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<p class="MsoNormal">I didn’t mean that the gifts have to be reported by the recipients. I totally agree with this. But reported by the gifter on federal income tax so that the amount gifted can be deducted from the gifter’s estate upon death so as to possibly
reduce the taxable estate and escape Washington estate taxes. But the gifts reported on the gifter’s federal income tax have no effect on it. It is just a record of lifetime gifts that will allow the Washington estate tax to be lowered. In my understanding,
which could be incorrect, when the gifts are given, up to $15,000 in any year to an individual, a form is submitted with the gifter’s federal income tax and then at death the estate may deduct these lifetime gifts from the gross estate to reduce it so that
Washington estate taxes may not have to be paid, depending upon the amounts. Perhaps I am not perfectly clear about this.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">I apologize if I’ve been unclear. <o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Susan<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
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<p class="MsoNormal"><b>From:</b> wsbapt-bounces@lists.wsbarppt.com <wsbapt-bounces@lists.wsbarppt.com>
<b>On Behalf Of </b>Philip N. Jones<br>
<b>Sent:</b> Friday, May 15, 2020 3:21 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv <wsbapt@lists.wsbarppt.com><br>
<b>Subject:</b> Re: [WSBAPT] large gifts of appreciated stock to charities in estate planning<o:p></o:p></p>
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<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">That is not correct. Gifts are not income and should never be reported on a federal income tax return. And Washington does not have an income tax.
<o:p></o:p></p>
<div>
<p class="MsoNormal">And lifetime gifts are not part of the gross estate and need not be deducted on the Washington estate tax return. The money is already gone before the date of death.<o:p></o:p></p>
<div>
<p class="MsoNormal" style="margin-bottom:12.0pt">Phil Jones <o:p></o:p></p>
<div>
<p class="MsoNormal">Philip N. Jones <o:p></o:p></p>
<div>
<p class="MsoNormal">Duffy Kekel LLP<o:p></o:p></p>
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<div>
<p class="MsoNormal">Portland, OR<o:p></o:p></p>
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<div>
<p class="MsoNormal"><a href="mailto:pjones@duffykekel.com">pjones@duffykekel.com</a><o:p></o:p></p>
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<div>
<p class="MsoNormal">(503) 226-1371<o:p></o:p></p>
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<p class="MsoNormal"><br>
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<o:p></o:p></p>
<blockquote style="margin-top:5.0pt;margin-bottom:5.0pt">
<p class="MsoNormal" style="margin-bottom:12.0pt">On May 15, 2020, at 3:13 PM, Susan Donahue <<a href="mailto:sdonahue@sdonahuelaw.com">sdonahue@sdonahuelaw.com</a>> wrote:<o:p></o:p></p>
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<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Ok. Thank you for the clarification. But I thought that the $15,000 maximum annual gifts to individuals had to be reported on Wash income tax so that they could be deducted from her gross estate at death. I’ll see if I can speak with
her tax accountant.<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Susan<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
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<p class="MsoNormal"><b>From:</b> <a href="mailto:wsbapt-bounces@lists.wsbarppt.com">
wsbapt-bounces@lists.wsbarppt.com</a> <<a href="mailto:wsbapt-bounces@lists.wsbarppt.com">wsbapt-bounces@lists.wsbarppt.com</a>>
<b>On Behalf Of </b>Philip N. Jones<br>
<b>Sent:</b> Friday, May 15, 2020 2:47 PM<br>
<b>To:</b> WSBA Probate & Trust Listserv <<a href="mailto:wsbapt@lists.wsbarppt.com">wsbapt@lists.wsbarppt.com</a>><br>
<b>Subject:</b> Re: [WSBAPT] large gifts of appreciated stock to charities in estate planning<o:p></o:p></p>
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<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">The lifetime charitable gifts are no longer part of her estate once they are made, so her estate need not worry about deducting them on an estate tax return. But she should be deducting them on her federal income tax return.
<o:p></o:p></p>
<div>
<p class="MsoNormal">The same is true of gifts to individuals, except they are not deductible on her income tax returns.<o:p></o:p></p>
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<p class="MsoNormal">Whether these gifts were or were not reported on gift tax returns does not change these answers.<o:p></o:p></p>
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<div>
<p class="MsoNormal">These answers are the same in both Washington and Oregon.<o:p></o:p></p>
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<div>
<p class="MsoNormal">Phil Jones<o:p></o:p></p>
</div>
<div>
<div>
<p class="MsoNormal" style="margin-bottom:12.0pt"> <o:p></o:p></p>
<div>
<p class="MsoNormal">Philip N. Jones <o:p></o:p></p>
<div>
<p class="MsoNormal">Duffy Kekel LLP<o:p></o:p></p>
</div>
<div>
<p class="MsoNormal">Portland, OR<o:p></o:p></p>
</div>
<div>
<p class="MsoNormal"><a href="mailto:pjones@duffykekel.com">pjones@duffykekel.com</a><o:p></o:p></p>
</div>
<div>
<p class="MsoNormal">(503) 226-1371<o:p></o:p></p>
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<p class="MsoNormal"><br>
<br>
<br>
<o:p></o:p></p>
<blockquote style="margin-top:5.0pt;margin-bottom:5.0pt">
<p class="MsoNormal" style="margin-bottom:12.0pt">On May 15, 2020, at 2:04 PM, Susan Donahue <<a href="mailto:sdonahue@sdonahuelaw.com">sdonahue@sdonahuelaw.com</a>> wrote:<o:p></o:p></p>
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<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Hello everyone,<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">I have a client who gives large gifts of appreciated stock to charities each year. I’m not certain the effect these gifts will have on her gross estate/taxable estate at her death. Are they treated the same as $15,000 gifts to individual
persons which, if the proper gift tax form is filed each year, can be deducted from the gross estate at death? I’m trying to figure out the best estate plan for her, but I’m not familiar with the effect of gifting appreciated stock to charities annually,
as she does. Any thoughts would be appreciated.<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Her estate is over the $2.193 million exclusion amount, but I’m not sure by how much. I am just beginning to work on this. If it is not too much over, she can have her estate just pay the 10%estate tax on the amount over $2.193 million
if her estate is worth less than $3.193 million, but the tax could be a lot more than the expense of creating an irrevocable trust. I think the purpose for her to have a trust would be to shelter her estate from taxes. But how do the annual charitable gifts
factor into this? I’m thinking an irrevocable trust of a certain amount of her present estate would keep her taxable estate at her death under the exclusion amount.
<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Any thoughts? All are appreciated.<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Susan<o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
<p class="MsoNormal">Susan Donahue<o:p></o:p></p>
<p class="MsoNormal">Law Office of Susan Donahue<o:p></o:p></p>
<p class="MsoNormal">125 West 2<sup>nd</sup> Avenue, Suite “B”<o:p></o:p></p>
<p class="MsoNormal">P.O. Box 81<o:p></o:p></p>
<p class="MsoNormal">Twisp, WA 98856<o:p></o:p></p>
<p class="MsoNormal">(509) 996-5944 (phone)<o:p></o:p></p>
<p class="MsoNormal">(509) 362-9692 (fax)<o:p></o:p></p>
<p class="MsoNormal"><a href="mailto:sdonahue@sdonahuelaw.com">sdonahue@sdonahuelaw.com</a><o:p></o:p></p>
<p class="MsoNormal"><a href="http://www.sdonahuelaw.com">www.sdonahuelaw.com</a><o:p></o:p></p>
<p class="MsoNormal"> <o:p></o:p></p>
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