What is a Split Gift? A Comprehensive Guide to Its Legal Definition
Definition & Meaning
A split gift is a type of gift made by one spouse to a third party, where both spouses can treat the gift as if it were made equally by each of them for tax purposes. This arrangement is often referred to as gift splitting or the gift splitting election. It allows married couples to potentially reduce their overall gift tax liability by utilizing both spouses' gift tax exemptions and rates. The provisions for split gifts are outlined in the Internal Revenue Code.
Legal Use & context
Split gifts are primarily relevant in the context of tax law, specifically in relation to gift taxes. They apply to married couples who wish to make gifts to individuals or organizations while minimizing tax implications. This term is significant in family law and estate planning, as it can affect how couples manage their financial gifts and obligations. Users can utilize legal templates from US Legal Forms to navigate the necessary documentation for split gifts effectively.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A married couple decides to give a $30,000 cash gift to their child. By electing to split the gift, each spouse can treat their contribution as $15,000, which may fall under the annual gift tax exclusion limit.
Example 2: A couple donates $20,000 to a charity. If they split the gift, they can each claim $10,000, potentially reducing their taxable estate (hypothetical example).
Relevant laws & statutes
The primary statute governing split gifts is found in the Internal Revenue Code, specifically under 26 U.S.C. § 2513. This section outlines the requirements and implications of gift splitting for married couples.