What is considered a gift to my children?

Question

• I understand that there is a $16,000 limit on gifts to each child, grandchild, etc. by each parent each year.
• I understand that if a child or grandchild is attending college, paying their tuition does not count as a gift.

First, have I got these two points correct? Are there additional conditions on the second point?

Second, suppose I pay a child's medical or home maintenance bill directly? Is that considered subject to the annual limit?

Third, I understand from another post on this exchange that if my annual giving exceeds $16,000, then the excess is subtracted from my allowed threshold for estate taxes. Is that correct?

Answer 1

First, have I got these two points correct? Are there additional conditions on the second point?

Yes, there is an important condition: tuition must be paid directly to the institution. I.e.: you don't give a check to your child and say "use this money to pay tuition", you give the check directly to the bursar.

For the first point - there's also "Generation-skipping tax" when dealing with, for example, grandchildren. This is to account for a grandparent giving gifts directly to grandchildren, skipping a generation for gift/estate tax purposes.

Second, suppose I pay a child's medical or home maintenance bill directly? Is that considered subject to the annual limit?

Similarly with medical expenses, which are also exempt if paid directly. Home maintenance or other living expenses, on the other hand, are not exempt.

Third, I understand from another post on this exchange that if my annual giving exceeds $16,000, then the excess is subtracted from my allowed threshold for estate taxes. Is that correct?

No, not the excess. All of it.