Unification of Gift and Estate Tax
To be able to proceed wisely when you are planning your estate you should have an understanding of the relevant tax laws. There are those who think that it is unfair, but acts of offering while you live or after you pass away are taxable.
The gift tax is stated to be “unified” with the federal estate tax. As an outcome, they both bring a 35% maximum rate as of this writing; however, this rate is scheduled to increase to 55% in 2013.
Why don’t you have to pay the gift tax whenever you offer someone a birthday present or Christmas gift? This is since there is a lifetime merged 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 provided $100,000 to each of your three kids next year using the life time combined exemption. Because it will stand at simply $1 million next year, just the very first $700,000 of your estate would subsequently be able to pass to your beneficiaries before the estate tax kicks in.
It must be kept in mind that there are some gift tax exemptions aside from the life time exclusion. You can provide as much as $13,000 to any number of individuals each year without sustaining any gift tax liability, and this does not affect your available lifetime merged exclusion.
This is a brief take a look at these 2 federal levies.