If the value of your estate exceeds the estate tax exclusion amount, which in 2014 stands at $5.34 million, it may occur to you that giving gifts may be a way to gain estate tax efficiency.
This exclusion applies to taxable gifts that you give throughout your life as well as the value of your estate, so using the lifetime unified exclusion really does nothing to preserve your estate tax cushion.
However, there is another exemption that you can use to give gifts in a tax-free manner. Every year, each taxpayer can give a certain amount to an unlimited number of individuals without incurring any gift tax responsibility.
In 2012, this annual per person exemption was set at $13,000. For 2013 and 2014, it has gone up to $14,000.
Giving gifts using this exemption will reduce the value of your estate, which in turn eases the estate tax burden that your heirs will face after your passing. In a sense you are giving inheritances in advance, and doing so without paying any taxes on the transfers.
You do not have to give the gifts directly. This exemption could be used to fund certain types of trusts or to distribute equity shares in a family limited partnership.
Because of the fact that the laws are always changing, the wise course of action is to consult with your estate planning attorney on a regular basis to make sure that your current plan is up to date in light of any changes that may have taken place since it was last reviewed.
- The Lessons from Lisa Marie - March 28, 2023
- Living Trust Bank Accounts and FDIC Insurance (VIDEO) - March 21, 2023
- Show Your Love by Creating an Estate Plan - March 3, 2023