How to Write a Gift Letter
Writing a gift letter is an essential step when you decide to give a significant financial gift to someone. It is a legal document that provides a record of the gift, including the amount given, the date of the gift, and the relationship between the giver and the receiver. This article will guide you through the process of writing a gift letter, ensuring that it is accurate, clear, and legally sound.
Understanding the Purpose of a Gift Letter
A gift letter serves several purposes. Firstly, it helps to document the gift for tax purposes. If the gift exceeds the annual exclusion amount, which is $15,000 per person in 2021, the giver may need to file a gift tax return (Form 709). Secondly, a gift letter can help prove that the gift is indeed a gift and not a loan. This is particularly important if the relationship between the giver and receiver is close, as there might be questions about the intent behind the gift.
Structuring Your Gift Letter
To start writing your gift letter, you should follow a clear structure:
1. Header: Include the date of the gift, the giver’s and receiver’s full names, and their addresses. If the gift is from a couple, both names should be listed.
2. Introduction: Begin by stating that you are writing this letter to document a gift from [Giver’s Name] to [Receiver’s Name].
3. Gift Details: Clearly state the amount of the gift and the type of property being gifted. If the gift is cash, specify the amount. If it’s a tangible asset, describe it in detail.
4. Relationship Between Giver and Receiver: Explain the nature of your relationship with the receiver. This helps to establish that the gift is not a loan or a form of payment.
5. Intention Behind the Gift: State that the gift is given without any conditions or expectations of repayment.
6. Signatures: Both the giver and the receiver should sign and date the letter.
Writing the Gift Letter
When writing the gift letter, keep the following tips in mind:
– Be Clear and Concise: Avoid using complex language or lengthy explanations. The letter should be easy to understand.
– Be Specific: Clearly state the amount and type of property being gifted.
– Be Objective: Focus on the facts of the gift and avoid expressing personal emotions.
– Keep a Copy: Make sure to keep a copy of the gift letter for your records.
Conclusion
Writing a gift letter is an important task that ensures your gift is legally documented and understood. By following these guidelines, you can create a clear and effective gift letter that will serve as a valuable record for both you and the receiver.
