When to File Form 709

March 30, 2012 — 1,493 views  
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As an estate planning professional, you'll likely have clients that want to make sizable gifts - of money, property or other valuable assets - to their relatives to ensure the preservation of their life savings. You'll need to make sure they understand the specific parameters that govern when to file form 709 and how to do so in adherence with the regulations of the Internal Revenue Service (IRS).

This document must be filed whenever a person gives a gift to anyone, in their family or otherwise, that exceeds a certain amount or is required to be reviewed by the IRS. The maximum amount has changed with time - as of 2011, it stood at $13,000. In other words, most gifts reaching that amount or below it aren't subject to the federal gift tax or generation-skipping transfer tax (GST).

All gifts - except those to one's spouse, which aren't taxed for any reason - above the annual exclusion must be taxed, and Form 709 must be completed so the IRS can determine the appropriate tax rate. That figure is itself capped - no gift tax can exceed 35 percent.

Certain gifts that aren't taxed must still be brought to the IRS' attention with this form - even some below the annual exclusion. These include "future interests" - gifts that cannot be used by the recipient until a later date, such as money in a trust fund.

Finally, if your client transfers money to a political organization, or to pay a recipient's medical or educational expenses, that gift isn't subject to the gift or GST tax.