Gift Taxes: How Much Your Generosity Could Cost You

Posted February 20, 2013 in Estate Planning by Michael Lonich.

Should you liquidate your trust to take advantage of the new federal estate tax exemption? You may not need to. Not immediately, anyway. As 2012 came to a close, there was some worry that the generous federal tax gift exemption would fall off of the fiscal cliff, leaving many estates vulnerable to the 35% federal estate tax for gifts. To the delight of many taxpayers and estate planners alike, the federal tax provision allowing an individual to give tax-free gifts totaling up to $5 million over his or her lifetime, is now permanent.* This “unified credit” may also be applied to an individual’s estate at death if it is not utilized before death.

If your estate isn’t large enough to cover a gift of $5.12 million during your lifetime, you may be delighted to know that the annual gift tax exclusion has also survived. So, any taxpayer may make a tax-free gift of $13,000 a year per recipient. For example, in 2013, a father can give $13,000 to his daughter, $13,000 to his grandson, and $13,000 to his neighbor, all tax free. Slowly making these tax-free gifts is a great way to ensure that your taxable estate is worth less than the federal estate tax threshold of $5.25 million when you pass, effectively insulating your loved ones from an estate tax of 40% down the road.

No matter what the size of your estate, it is smart to have a plan for the future. The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters including wills and living trusts. If you are interested in developing an estate plan or reviewing your current estate plan, contact the experienced estate planning attorneys at Lonich & Patton for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

*See http://www.irs.gov/pub/irs-pdf/p950.pdf for a detailed explanation of the gift exemptions.

Share |

Comments

There are no comments for "Gift Taxes: How Much Your Generosity Could Cost You"

Post A Reply




*