And if your gifts are less than $15,000 per year, you don’t even have to report it. So the vast majority of gifts are not supposed to be taxed or reported.

This is how my wife and I are saving for our son's future. We gift him money (you can each gift up to the limit without reporting it or decreasing the lifetime gift limit) and then we invest the money on his behalf via a UTMA account with Vanguard.

He'll owe taxes upon withdrawal in the future, 17 years from now at the earliest, but he'll also have full freedom to use the money any way he sees fit. So school, starting a business, buying a house or letting the investment ride until retirement.

You might want to look into putting some of that money into a 529 plan; that allows the kid to pay for college without paying taxes on the gains.

It's a risk if the kid doesn't end up going to college; you end up paying, I think, regular taxes on the earnings plus like 10% penalty.

Still, 17 years of tax free growth would be a pretty good reward if the kid does go to school.

Or blackjack and hookers...

It's possible. I hope that he'll use the money in ways his mom and I would consider to be more constructive, but once he is old enough he gets control of the account and we have no say in it. Fingers crossed.

Note that it is $15k ($14k last I checked, but it may have risen) per gifter-giftee pair.

So I can give my son $14k, my wife can give my son $14k, and we can both given my daughter a combined $28k all without even registering against the $5 million lifetime exclusion or paying any gift taxes. And couples can do that every single year for decades, which adds up to millions even without touching the exclusion.

> $15,000 per year

Importantly, per person receiving. In principle you have a virtually infinite tax-free gift giving exception available if you distribute your assets to enough people.

Per person receiving and person giving pair. So, a married couple can give their child $30K/yr and could give the child’s significant other another $30K/yr.

Not that it would probably ever apply to me, but I'm curious if that's per "individual gift giver - giver receiver" pair? Or is it the case that it's solely per individual gift _giver_? As in, would receiving a $500 gift from Bill Gates (who presumably has met the $5MM lifetime threshold) be fully taxable? Just random Sunday curiousness. :)

For what GP is talking about, it's per giver. It's a combined gift/estate tax, with the goal of preventing someone from giving to escape their eventual estate tax burden.

But that isn't really relevant for the average person - gifts below the annual exclusion amount (something like $14k) are exempt from reporting/recording/tallying at your death. And this does apply per each pair of people per year, so in your scenario BG would have nothing to report.

Would have to be per giver, otherwise it would be trivial to avoid (want Dave to get another $1m, either give $2m and have the taxes taken, or give $1.1m to Joe Bloggs, who gives $1m to Dave and keeps the rest.

Individual gift giver. So lifetime max per person! Not too shabby.

Lifetime max $5,000,000. Yearly max changes but hovers around $15k per person (wife and husband diffrent people!) and doesn’t touch yearly max.

Further complicating the situation, there is a roughly $30k (don’t bother looking it up) exception per year that allows couples to gift under that amount to individuals without affecting my lifetime $5m exclusion.

So if we have 5 children and 10 grandchildren we are giving away $450,000 a year to our family and still get another $5M when we die gift tax free.

That doubled with the tax reform. It's roughly 10.x million per person now.

Wow no way, thanks for the update.

Expires 2025 iirc