VIEWS: 7 PAGES: 1 CATEGORY: Legal POSTED ON: 1/19/2012
Taxation is an interesting thing, and a lot of people would question why you should have to pay a tax when you give someone a gift.
Direct Asset Transfers Free Of The Gift Tax Taxation is an interesting thing, and a lot of people would question why you should have to pay a tax when you give someone a gift. If you were to purchase a painting for instance, you would have to pay sales tax (unless you lived in one of the five states that does not have a sales tax). And of course you would have purchased the painting with money that you had left over after you paid income tax on the earnings. So you have already been rather heavily taxed before you bought the painting, and you were taxed on the purchase. Why should you have to pay yet another tax if you choose to give it to someone? And we are not talking about a small drop in the bucket here. The rate of the gift tax at the present time is 35%. All the above is food for thought, but we do live in the real world and we must react accordingly. Though there is a gift tax in place, there are exemptions. There is a $5 million unified gift/estate tax exemption so you can give gifts equaling this amount free of taxation throughout your life (subject to the sunset provisions of the applicable Act at the end of 2012). However, your available estate tax exclusion is going to be reduced by the amount of gifts that you give utilizing this exemption. Beyond the unified exclusion there are some other gift tax exemptions that enable tax-free transfers of assets. One of them allows each person to give as much as $13,000 as a tax-free gift to any number of recipients each year. This is a per-person exemption, so a couple could give as much as $26,000 to an unlimited number of people if they were to pool their respective exemptions. You can also pay the medical expenses of others as a gift free of the gift tax, and you can pick up college tuition costs as a tax-free gift as well. Tax-free gift giving can reduce the taxable value of your estate while enabling the transfer of assets in a tax-free manner, and it is certainly something to keep in mind when you are making preparations for the future. Experienced estate planning attorneys Mobile AL of the Ryan Hicks Cumpton & Cumpton LLP offers estate planning and business planning resources to residents of Mobile AL. To learn more about these free resources, please visit http://www.epattorneys.com today.
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