The federal gift tax is a tax by the government that applies to either assets left by a decedent at their death or assets given by an individual during their lifetime. In essence, whether you give your assets away while you are still living, or give them away when you die, they are subject to a tax. Gift tax applies to lifetime gifts; estate tax applies to assets left at death. The idea is that whether you give assets away while you’re alive, or leave them at your death, they’re taxed the same way, at the same rate. (If there were no gift tax, then anyone could completely avoid the estate tax by giving everything away just before death.) Read on to learn about the changes in the 2014 federal estate and gift tax and how these changes may affect your estate.
Adjustment to The 2014 Federal Estate and Gift Tax
The 2014 federal estate and gift tax exemption amount has been adjusted for estates and decedents who die in 2014. The new exemption amount is $5.34 million, up from $5.25 million in 2013. Clearly, this tax affects only the nation’s richest families; and will not have any impact on most estates. The annual federal gift tax exclusion amount was not changed and remains at $14,000 per recipient. In addition to the $5.34 million exemption, many other gifts are not subject to the gift tax—for example, gifts to a spouse. So if you give your $1 million house and $4 million of other property to your children, and another $7 million to your spouse, you still won’t owe any gift tax.
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