Estate and Gift Tax

 

The estate tax, sometimes referred to as the “death tax,” is a tax imposed on the transfer of the entire estate of a deceased person, regardless of how it is disbursed. However, a certain amount of an individual’s estate is exempted from taxation by the federal government. In 2009 the exclusion increased to $3.5 million for each estate, and without political reform, the estate tax will be repealed for one year–2010–and then readjust in 2011 to $1 million. Estates above the applicable exempted amount are subject to estate tax, but only for the amount above the exemption. As a general rule, if a gift is made during the donor’s lifetime (called an inter vivos gift) the gift is not subject to the estate tax. The gift tax imposed by Congress limits the donor’s ability to circumvent the estate tax by gifting during his or her lifetime. There are two available exemptions from the gift tax. First, there is an annual exclusion for transfers up to $13,000 (as of 2009) per person per year, which are not subject to the gift tax. A married couple, if both US citizens, can combine their gift exemptions to make gifts up to $26,000 per person per year without incurring gift tax liability. Second, there is a “unified credit” of $1 million that eliminates gift taxes until an individual makes gifts of more than that limit to another person. Our expertise in this area may eliminate or significantly reduce our client’s death and gift tax liability.