To be able to proceed smartly when you are planning your estate you should have an understanding of the appropriate tax laws. There are those who believe that it is not fair, however acts of offering while you live or after you pass away are taxable.
The gift tax is stated to be “combined” with the federal estate tax. As an outcome, they both carry a 35% maximum rate as of this writing; nevertheless, this rate is scheduled to rise to 55% in 2013.
Why don’t you need to pay the gift tax whenever you give someone a birthday present or Christmas gift? This is due to the fact that there is a lifetime combined exclusion. It currently sits at $5.12 million but it is decreasing to $1 million next year.
To supply an example, let’s say that you gave $100,000 to each of your three children next year using the life time unified exemption. Considering that it will stand at just $1 million next year, just the very first $700,000 of your estate would consequently be able to pass to your heirs prior to the estate tax kicks in.
It should be noted that there are some gift tax exemptions besides the lifetime exemption. You can provide as much as $13,000 to any variety of people each year without incurring any gift tax liability, and this does not affect your offered life time merged exclusion.
This is a quick look at these 2 federal levies.