The Tax Advantages Of Gift Giving
Some people are surprised when they hear about the details of the federal estate tax. They are under the
impression that this tax does not apply to them because it is only imposed on the super-wealthy. If you
think this way you could be making a mistake that could cost your loved ones a great deal of money.
There is an estate tax exclusion in place and at present it is $5 million. This means that the first $5
million that you leave to your heirs can be transferred tax-free. But anything that exceeds this amount
will be subject to the estate tax, which is carrying a 35% rate at present.
A lot of people would say that this amount of money does not make you extraordinarily wealthy. And
in fact, in the beginning of 2013 the estate tax exclusion is scheduled to be reduced to just $1 million.
Since there are over 8 million households in the United States with assets in excess of $1 million this
tax is something that is relevant to a broad sampling of Americans.
One way that you can reduce the taxable value of your estate for estate tax purposes would be to give
gifts while you are still alive. There is a gift tax in place that carries the same rate as the estate tax, but
There is an annual exemption that allows each taxpayer to give gifts of as much as $13,000 to any
number of individuals every year without incurring any gift tax liability. Since this is a per-person
exemption, a married couple could choose to combine their individual exemptions and give as much as
$26,000 to any number of gift recipients free of taxation.
If you were to do this over an extended period of time you could transfer a significant store of assets to
people who would otherwise be inheriting them someday. And in the process you would be reducing
the taxable value of your estate.
Experienced estate planning attorneys Redlands CA of the Elder and Disability Law Firm offers estate
planning and business planning resources to residents of Redlands CA. To learn more about these free
resources, please visit www.san-bernardino-elder-law.com/ today.