Gift Tax Reality

Physician's Money Digest, November30 2003, Volume 10, Issue 22

Love orMoney 2

Anotherdose of reality:

When Erin Brodie won $2 millionon the NBC-TV reality show , she followed her heart, butnot the advice a financial advisor mighthave given her. When Chad Viggianopassed up $1 million of his own tochoose her as his girlfriend, Erin wrotehim a $500,000 check on the spot.Under the gift tax rules, however, Erinis allowed to give Chad only $11,000 ina single year. Any amount above thatgets charged against her lifetime exemptionof $1 million. So Erin's burst ofgenerosity knocked $489,000 off herexemption, which could eventually puther heirs in a nasty tax bind. Erin may not even havethe $500,000 to give. Her prize is in theform of an annuity, which will ladle outthe cash over 40 years. If she chooses totake a lump sum, the amount is likely tobe less than half of the $2-million prize.