To be able to continue intelligently when you are planning your estate you need to have an understanding of the appropriate tax laws. There are those who think that it is unfair, however acts of providing while you live or after you die are taxable.
The gift tax is said to be “unified” with the federal estate tax. As an outcome, they both carry a 35% maximum rate since this writing; however, this rate is scheduled to increase to 55% in 2013.
Why don’t you need to pay the gift tax whenever you offer someone a birthday present or Christmas gift? This is due to the fact that there is a life time unified exclusion. It presently sits at $5.12 million however it is decreasing to $1 million next year.
To supply an example, let’s say that you gave $100,000 to each of your 3 kids next year using the lifetime merged exemption. Given that it will stand at just $1 million next year, just the very first $700,000 of your estate would subsequently be able to pass to your successors prior to the estate tax kicks in.
It should be kept in mind that there are some gift tax exemptions besides the life time exemption. You can offer 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 lifetime unified exclusion.
This is a quick look at these 2 federal levies.