Unification of Gift and Estate Tax
To be able to continue wisely when you are planning your estate you must have an understanding of the relevant tax laws. There are those who think that it is unfair, but acts of giving while you live or after you die are taxable.
The gift tax is stated to be “merged” with the federal estate tax. As a result, they both carry a 35% optimum rate as of this writing; however, this rate is set up to rise to 55% in 2013.
Why don’t you have to pay the gift tax each time you offer someone a birthday present or Christmas gift? This is because there is a life time merged exclusion. It presently sits at $5.12 million however it is decreasing to $1 million next year.
To provide an example, let’s say that you offered $100,000 to each of your 3 children next year utilizing the life time combined exemption. Given that it will stand at simply $1 million next year, just the very first $700,000 of your estate would subsequently have the ability to pass to your heirs before the estate tax kicks in.
It needs to be noted that there are some gift tax exemptions other than the life time exemption. You can offer as much as $13,000 to any number of people each year without sustaining any gift tax liability, and this does not impact your available lifetime unified exclusion.
This is a quick look at these 2 federal levies.