Estate and Gift Taxes
The estate tax and the gift tax are parts of the federal Unified Gift and Estate Tax system. The estate tax is a tax on the fair market value of your gross estate, or all the property you owned or had an interest in at the time of your death; there are a limited number of deductions that can be applied to reduce the gross estate’s value.
The gift tax applies to transfers of money or property while you are still alive. The amount at which taxation begins is regulated by an annual exclusion amount.
The federal estate tax is a tax on the fair market value of a person's gross estate, or all the property the person owned or had an interest in at the time of death; there are a limited number of deductions that can be applied to reduce the gross estate’s value.
What is Your Estate?
A person's estate is defined as the value of all of his or her assets at death, which includes:
- Stocks and bonds
- Real estate
- Personal property
- Trust assets
- Business interests
- Life insurance, with certain exceptions
- Retirement accounts
Estate Tax Deductions and Exemptions
A portion of the gross estate amount receives tax-exempt status and certain deductions are also taken into consideration, such as:
- The share of a property left to a surviving spouse
- Funeral expenses of the estate
- Debts owed at the time of death
- Property that is legally transmitted to a tax-exempt charity.
Changes in Federal Estate Tax Law
Federal estate tax law has undergone several changes in recent years. In 2010, for the first time since 1916, there was no federal estate tax. When it was reimplemented in 2011, the 2010 Tax Relief Act (passed in December that year) had instituted some changes, including a $5 million per person exemption from estate tax.
That legislation was due to sunset in 2013 and return the estate tax to its 2001 level. However, in January 2013 Congress made permanent an estate tax on estates in excess of $5 million at a rate of 40 percent. This amount has adjusted for inflation each year, and in 2017, the estate and gift tax exemption for an individual was raised to $5.49 million.
With law offices in Oakland and Walnut Creek, Vaught & Boutris LLP provides estate and trust expertise throughout the San Francisco Bay Area, including Contra Costa County and Alameda County. We provide our clients with estate and asset protection planning, including wills, trusts, and probate; trust administration; and estate and trust litigation. If you wish to contact us, you may contact us online or call 510-430-1518 today.
The federal gift tax is a part of the federal Unified Gift and Estate Tax system and applies to transfers of money or property while you are still alive. However, you are exempt from the gift tax up to a certain dollar amount (in 2017, up to $14,000 given to any number of different people).
The Basics of the Gift Tax
When a person gives another person or a non-charitable organization money or property that is equal to or above the annual gift tax exclusion amount, a gift tax is imposed on the giver. In 2017, a U.S. taxpayer can give up to $14,000 to any number of different individuals without incurring the gift tax. If someone is married, the law effectively allows them to give double this amount by "gift splitting."
Other rules that apply to gift tax law include:
- Education expenses, paid directly to the educational instution, may be nontaxable if done properly.
- Gifts for medical expenses, paid directly to the provider may be nontaxable if done properly.
- Gifts given to a U.S. citizen spouse, and some gifts given to a non-U.S. citizen spouse, will be nontaxable if done properly.
If you are considering giving a gift, or you are the recipient of one, and need more information about gift tax planning, the attorneys at Vaught & Boutris LLP would be happy to speak with you.