FAMILY GIVING

You can gift up to $10,000 per person per year to ANYONE (I'm in the book) without incurring any gift tax. Should you give more than that annually to any one person, you must use your $675,000 lifetime exemption. After that a gift tax is incurred. However, giving to family members can be fraught with problems- if simply to the IRS which needs to know whether it truly was a gift or if it was a loan. Financial World suggests the following 10 rules when potentially giving money to family members

1. Learn the law before you give. Know the tax differences between gifts and loans

2. Give because you want to- not because you feel you must. Loans and gifts should be from the heart- not emotional blackmail

3. Give only when all other sources have been exhausted. "Could the money be borrowed elsewhere at reasonable rates?"

4. Give only if you can afford to. Make sure you are financially sound before giving to others.

5. Make the loan only if it makes economic sense. "Can the new business actually succeed? Is the house within the economic means of the child?"

6 Have a plan in case the loan cannot be repaid. "Would you lose everything to bankruptcy if the business folds. What happens if the child dies or becomes disabled?"

7. Consider what happens if there is a divorce. Will it become encumbered by he other spouse?

8. Lend only to someone you trust. Judge the reliability as though they were a non family member

9. TALK it over with your spouse. They should be aware of what is being done- and hopefully in agreement.

10. Make the transaction as formal a possible. Or as I state, PUT IT IN WRITING.