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 federal estate and gift tax and how it may affect your estate.
Adjustments to Federal Estate and Gift Tax
The federal estate and gift tax exemption amount is regularly adjusted for estates and decedents. In 2014, the lifetime exemption amount was $5.34 million, up from $5.25 million in 2013. There have been several adjustments to the tax exemption amount since then. In 2020, the new amount rises to $11.58 million. Keep in mind, this is a “per person” exemption meaning married couples can exclude twice as much in lifetime gifts. Clearly, this tax affects only the nation’s richest families; and does not have any impact on most estates. The annual federal gift tax exclusion amount is $15,000 per recipient. In addition to the 2020 $11.58 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.
If you are considering preparing estate planning documentation such as a living trust, will or other estate documents, contact A People’s Choice. We can help in the preparation of all required paperwork without incurring the high cost associated with hiring an attorney. For help in filling out the necessary forms, contact A People’s Choice for affordable non-attorney legal document help. While we will not give you legal advice, we can offer guidance and make the process inexpensive, easy and hassle-free.