What is gift tax and how does it apply to making lifetime gifts?
By: LawInfo
In 2012, individuals are allowed to make lifetime gifts of up to $5,133,000, and couples are allowed to make lifetime gifts of up to $10,266,000 before the 35% marginal rate on gifts are applicable. The reason gift and estate taxes are often discussed at the same time is because any amount gifted during one’s lifetime will minimize the amount of their exemption.
For example, if an individual gifted $5,133,000, still had an estate worth $10,000,000 post-gift, and dies later this year, they would be subject to a marginal rate of tax of 35% of $10,000,000. In other words, you can’t double dip in both the estate and gift tax.
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Additional Estate and Inheritance Tax FAQs
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What Is An Estate Tax?
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What is the death tax and how does it affect estate planning?
A: The “death tax” is another term for the estate tax. The gift tax is also a tax related to estate tax. These two taxes are commonly known as … More -
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How Can I Reduce My Estate Tax Upon My Death?
A: Federal Estate Taxes are only charged against Estates with net values in excess of the amount set by the law in place at the time of the person's death. The … More -
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What is the estate tax exemption and how is it calculated?
A: Broadly speaking, the estate tax is calculated on the amount in an individual’s estate at the time of their death. In 2012, if an individual’s estate is … More -
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Why is there a key difference between estate tax in 2012 and 2013?
A: The current Estate Tax system is set to expire in 2013. Next year, an individual will have an estate and gift tax exemption of $1,000,000. A couple does not have … More -
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Are Non-Resident and Resident Aliens treated the same as US residents for the purposes of transfer taxes?
A: No. Gift and estate tax exemptions are available for US citizens and domiciliaries, however additional planning should be completed for non-resident and resident … More -
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Why should I plan my estate in 2012?
A: The gifting that can be completed tax-free in 2012 is significant. If one has a large estate it may benefit them to take advantage of the current large gift tax … More -
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Do I need an attorney to help with my estate planning?
A: Proper estate planning is vital in order to optimize the exemptions you may be eligible for and to maximize the amount your estate can retain. It is important to … More
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