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|Copyright© 2004 to 2015 Colin M. Cody, CPA and TraderStatus.com, LLC, All Rights Reserved.|
Inflation-adjusted for 2015: the annual gift tax exclusion is unchanged at $14,000 ($143,000 for gifts to non-citizen spouses).
Estate tax exemption and gift tax exemption increases to $5,440,000 with a 40% tax tax. (Lifetime gift tax exemption may drop after 2015).
Married couple estate tax exemptions are automatically portable (to the surviving spouse). This effectively doubles the estate tax exemption to $10,880,000.
Inflation-adjusted for 2014: the annual gift tax exclusion is unchanged at $14,000 ($143,000 for gifts to non-citizen spouses).
Estate tax exemption and gift tax exemption increases to $5,340,000 with a 40% tax tax. (Lifetime gift tax exemption may drop after 2014).
Married couple estate tax exemptions are automatically portable (to the surviving spouse). This effectively doubles the estate tax exemption to $10,680,000.
Inflation-adjusted for 2013: the annual gift tax exclusion increases to $14,000 ($143,000 for gifts to non-citizen spouses).
Estate tax exemption and gift tax exemption increases to $5,250,000 with a 40% tax tax. (Lifetime gift tax exemption may drop after 2013).
Married couple estate tax exemptions are automatically portable (to the surviving spouse) theoretically without the need to retain a lawyer to form a credit shelter trust. (but only if first spouse dies during 2011 or 2012 or 2013)
You need to file Form 706 for the $5MM portability
In short, the Code says that the election has to be on a timely return. IRS doesn't have the authority to override the Code. But was there a trust or a will? For instance, if there was a trust, and if the trust provides for a bypass trust upon the first death, then maybe the bypass trust eliminates the need to use portability. Setting up the bypass trust at this point might be a hassle but it might be worthwhile.
2010 / 2011 / 2012 changes
Estate tax exemption is $5MM with a 35% flat tax (as to be adjusted by Congress during 2012).
Lifetime gift tax exemption jumps from $1MM to match this new $5MM level for gifts made during 2011. The amount increases to $5,120,000 for 2012.
Lifetime gift tax exemption is schedule to drop to $1MM on 1/1/2013.
Married couple estate tax exemptions are now automatically portable (to the surviving spouse) theoretically without the need to retain a lawyer to form a credit shelter trust. (but only if first spouse dies during 2011 or 2012)
update: Some members of Congress are seeking to change the estate tax exemption to $3.5MM with a 45% flat tax thereafter.
Being aware of what one's tax basis in assets received as a gift or inherited through a decedent's estate has been a problem for years. Effective with 2010 the IRS has developed a form for pass over of tax basis to the recipients. In the future, this may develop to cover more assets, including gifts.
New IRS basis reporting form 8939
2008 / 2009 changes
Inflation-adjusted figures for 2009: the annual gift tax exclusion increases to $13,000 ($133,000 for gifts to non-citizen spouses). Other changes include: the limit for special use valuation is $1,000,000; recipients of gifts from certain foreign persons must be reported if those gifts exceed $14,139 in the aggregate; the 2% portion for Section 6166 is $1,330,000. The limit on contributions to funeral trusts is repealed for taxable years beginning after August 29, 2008.
An individual can give $14,000 each year to as many persons as he or she may choose. A donee may be a child, a child's spouse, other family member, or a non-relative. Annual gifts that do not exceed the $14,000 limit are not subject to federal gift tax. and no gift tax return needs to be filed for such transfers. For most states, annual exclusion gifts often do not incur state gift taxation because most states do not impose a gift tax.
Annual exclusion gifts that are made outright to a grandchild or more remote descendant also do not incur generation-skipping transfer (GST) tax. GST tax may otherwise apply when lifetime transfers or transfers upon death are made which skip a generation.
The federal estate tax benefit of a single $14,000 annual exclusion gift can be about $5,600. Any future appreciation in value or the accumulation of future income generated by the property given away is also excluded from the donor's taxable estate.
For residents of the District of Columbia and Maryland, additional savings of about $1,100 apply because these jurisdictions impose their own estate tax in addition to the federal estate tax.
A married couple can effectively double the savings. This can be accomplished with each spouse, separately each from their own separate bank account , giving $14,000 each per recipient (for a total of $26,000). Further, a married couple can use each individual spouse's $14,000 annual limit regardless of which spouse actually owns the transferred money (or property), such as when a jointly held checking account is used to pay out the gifts from. This is accomplished by the timely filing of a federal gift tax return signed by both spouses, making the so-called "split-gift election." The need for the separate gift tax return can sometimes be avoided simply by avoiding the use of a jointly held checking account for gift giving, and using a separately held bank account from which the gift is made from.
In addition to the $14,000 annual gift tax exclusion, an individual may directly pay medical or educational expenses in an unlimited amount. Such payments are excluded from the federal gift tax (also avoiding gift and estate taxes in most states) and do not reduce the $14,000 annual exclusion. If the person qualifies as your dependent for medical itemized deductions, you may be entitled to a deduction for the payments as well.
Annual exclusion gifts may be (and frequently are) made in trust. The trust must be specifically designed to ensure that annual gifts made in trust continue to qualify for the $14,000 annual exclusion, otherwise an annual gift tax return is required and your life-time exclusion is depleted. Annual exclusion gifts also may be made to Educational Section 529 plans to cover college costs for a beneficiary, such as a grandchild. Special feature: optionally, via an election made on a gift tax return, five years of annual exclusion gifts may be made all at one time (i.e., up to $65,000 for an individual donor in 2009, or up to $130,000 for a married donor electing a split-gift election in 2009) to a Section 529 plan.
Nolo Gift Tax FAQ
State Tax Central (all states)
AZ has neither an
inheritance tax nor a gift tax.
Last updated: January 02, 2015January 2014
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