Triggering the Gift Tax

I want to give my adult daughter $13,000 as a gift. If I give her the check on January 1, can I buy her lunch later in the month without exceeding the annual gift-tax exemption? Can I buy her a laptop for her birthday or a big-screen TV for Christmas? --A.M., Richmond, Va.

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Technically, all of those gifts count toward the annual limit (which rises from $13,000 to $14,000 in 2013). But you don’t need to worry about paying for lunch.

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“No one actually reports such small things, and they are difficult to trace,” says Karen Goldberg, a CPA and estate-planning attorney with consulting firm EisnerAmper. Nor is the IRS likely to track your gift of a laptop or TV. It can, however, track gifts of stock or those made by check. “If an estate is audited, the IRS typically requests the decedent’s bank and brokerage statements for the three years prior to his or her death,” says Goldberg. “Unreported gifts of stock and gifts made by check can be easily traced this way.”

Keep in mind that people may give up to the limit per person each year to as many people as they like -- doubling the amount for a married couple. It’s highly unlikely that you’d owe tax on a larger gift, either. For 2012, each taxpayer has a credit to cover the gift tax on up to $5.12 million in gifts above the annual exclusion amount. (Any part of the credit used will reduce the amount of the credit available to offset estate taxes on transfers after death.) If you exceed the annual limit, though, you must file a Form 709 with the IRS to keep track of how much of the credit you’ve used up.

401(k) contributions

I’d like to put a large lump sum into my 401(k) outside of my payroll deduction to minimize the tax bite and get closer to contributing the maximum for the year. Can I do that? --A.K., Washington, D.C.

Pretax contributions to your 401(k) must be made through payroll deduction, so you can’t add outside money to boost your tax break. But you may still be able to increase your contributions to get closer to the federal $17,000 maximum for 2012 ($22,500 if you’re 50 or older this year).

Some employers let you contribute a year-end bonus to your 401(k) if you designate the money before the check is paid. And most employers allow plan participants to change the amount earmarked for their 401(k) at any time, which leaves you a small window this year to increase your contribution.

Let your benefits manager know right away if you plan to do this, as the change may take one to two paycheck periods to take effect. And make sure your plan cuts off contributions when you reach the limit.

Medicare open enrollment

What changes will there be to Medicare Part D and Medicare Advantage plans in 2013, and when do I need to decide on a plan? --L.T., Milwaukee

For Part D prescription-drug coverage, the doughnut hole (the gap in coverage during which you must pay more out of pocket) will narrow. In 2013, the discount on brand-name drugs you pay for in the coverage gap will rise from 50% to 52.5%, and the federal subsidy to help pay for generics will rise from 14% to 21%.

As for costs, the average premium for Part D will continue to be about $30 per month. But plans continue to make other changes -- such as boosting co-payments or changing pricing tiers for your medications -- that can result in higher out-of-pocket costs even when the premium remains the same.

Medicare Advantage plans, which cover medical expenses and drugs, may also change coverage and prices, and more are shrinking their networks. Don’t assume your doctors and hospitals will remain in the plan’s network in 2013.

You have from October 15 to December 7 to pick your Part D or Medicare Advantage plan for next year. To explore your options, go to www.medicare.gov/find-a-plan anytime after October 1.

This article first appeared in Kiplinger's Personal Finance magazine. For more help with your personal finances and investments, please subscribe to the magazine. It might be the best investment you ever make.

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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.