Understanding the Annual Gift Tax Exclusion

8/13/2019 Understanding the Annual Gift Tax Exclusion

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nderstanding the Annual Gift Tax Exclusion www.wealth-counselors.com

UNDERSTANDING THE

ANNUAL GIFT TAX

EXCLUSIONLearn How You Can Optimize the Value

of Your Annual Gift Tax Exclusion andMitigate Your Estate Tax Exposure

GERALD M. DORN

RENO NEVADA ESTATE PLANNING ATTORNEY
http://www.wealth-counselors.com/estate_planning/index.php/estate-planning/http://www.wealth-counselors.com/estate_planning/index.php/estate-planning/http://www.wealth-counselors.com/estate_planning/index.php/estate-planning/


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When you first hear about the existence of the federal estate tax you may get a

bright idea. You could just give away assets while you are living to avoid this

death tax.

Actually, this used to be possible years ago for a limited amount of time. The

estate tax was enacted in 1916. For a while, there was no gift tax. As a result,

wealthy families would in fact give gifts to avoid the estate tax.

In 1924 the gift tax was enacted to close this window of opportunity. It was

repealed in1926, but it was reenacted in 1932, and it has been in place ever

since. In 1976 it was unified with the estate tax. This was the same year that

the generation-skipping transfer tax was enacted.

UNIFICATION OF TRANSFER TAXES

These three taxes on asset

transfers are unified. There is a

$5.34 million lifetime exclusion or

credit in 2014. Asset transfers

that exceed this amount are

potentially taxable. Taxable

transfers can take place while you

are living or after you pass away.

The maximum rate of these levies is 40 percent under existing laws.


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The reason why we state that the transfers that you make exceeding the

exclusion are potentially taxable is because there are legal steps that you can

take to mitigate your exposure.

ANADDITIONAL EXCLUSION

The lifetime $5.34 million unified transfer tax exclusion is not the only exclusion

that can be utilized when you are planning your estate. There is also an annual

gift tax exclusion.

This exclusion sits completely apart from the unified exclusion. At the current

time, the amount of the annual gift tax exclusion is $14,000.

Each year you can give gifts to any number of people totaling as much as

$14,000 per recipient free of the gift tax without using any of your unified

exclusion.

If you are thinking that $14,000 is not a lot of money when you are talking

about an estate valued in excess of $5.34 million, this gift tax exclusion can

actually add up over time.


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This medical exemption extends to the purchase of health care insurance for the

benefit of someone else.

EDUCATIONAL EXEMPTION

It is also possible to pay for school tuition as a tax-free gift. Once again, you

must pay the institution directly. You cannot give the money to the student if

you want to utilize this exemption.

This is a tuition-only exemption. You cannot use it to pay for living expenses,

books, fees, etc.

CONCLUSION

Let's look at what we have learned. There is a gift tax, an estate tax, and a

generation-skipping transfer tax. The three taxes are unified. There is a lifetime

$5.34 million unified exclusion.

There is also a $14,000 annual gift tax exclusion. You can give gifts to an

unlimited number of recipients totaling as much as $14,000 per person tax-free

each year. These gifts would not impact the amount of your available unified

transfer tax exclusion.

You can also pay medical bills and school tuition for others tax-free without

using any of your unified exclusion.


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If you are interested in learning how you can optimize the value of your annual

gift tax exclusion, arrange for a consultation with a licensed estate planning

attorney.

REFERENCES

Collaborative Research Project

http://lobby.la.psu.edu/027_Estate_Tax/frameset_estate.html

Forbes

http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-

estate-planning/
http://lobby.la.psu.edu/027_Estate_Tax/frameset_estate.htmlhttp://lobby.la.psu.edu/027_Estate_Tax/frameset_estate.htmlhttp://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-estate-planning/http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-estate-planning/http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-estate-planning/http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-estate-planning/http://www.forbes.com/sites/janetnovack/2012/10/14/the-forbes-guide-to-estate-planning/http://lobby.la.psu.edu/027_Estate_Tax/frameset_estate.html


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nderstanding the Annual Gift Tax Exclusion www wealth-counselors com

About the Author

Gerald M. Dorn

Gerald Dorn is a shareholder and has been a partner at Anderson,Dorn & Rader, Ltd. Since 1998. Mr. Dorn has extensive experience

serving wealthy families and business owners in the development of

estate, tax and asset protection planning strategies. He made the

decision to focus his practice in the area of estate planning after

witnessing the personal grief and financial loss suffered by several of

his clients as a result of poor planning. These experiences motivated

him to dedicate his professional life to assisting his clients to preserve their lifes work for

their heirs and to create a lasting legacy for those they love. Mr. Dorn is able to accomplish

his mission through the use of a vast number of estate planning tools, both basic and

advanced, for all of his clients at Anderson Dorn & Rader, Ltd.

Just out of law school, Mr. Dorn helped to found Harris & Dorn, LLP., a private firm in San

Diego that concentrated on family law, estate planning and probate cases. Mr. Dorn relocated

the Reno area when he was offered a position as general counsel to a national estate

planning company, drafting documents and teaching continuing legal education classes to

attorneys, financial planners and accountants. Mr. Dorn is a frequent author and lecturer on

such topics as Revocable Living Trusts, Family Limited Partnerships and Family Limited

Liability Companies, Irrevocable Trusts, Tax Planning with Life Insurance, Charitable

Remainder Trusts, Charitable Lead Trusts, Private Foundations, Qualified Personal Residence

Trusts, Dynasty Trusts, Sales to Defective Grantor Trusts, Estate and Tax Planning for IRAs

and Qualified Plans, Trust And Estate Administration and Asset Protection. He is a member of

WealthCounsel, LLC, WealthCounsel Advisors Forum, InKnowVision, LLC, the State Bar of

Californias Estate Planning, Trust and Probate Law Section, the American Bar Associations

Real Property, Probate and Trust Law Section and the Washoe County Bar Association.

Anderson, Dorn, & Rader, Ltd.

Legacy and Wealth Planning Attorneys

500 Damonte Ranch Parkway, Suite 860

Reno, NV 89521

Phone: (775) 823-9455

Fax: (775) 823-9456
http://www.wealth-counselors.com/estate_planning/index.php/estate-planning/http://www.wealth-counselors.com/http://www.wealth-counselors.com/estate_planning/index.php/estate-planning/

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Understanding the Annual Gift Tax Exclusion