Federal Gift and Estate Tax Summary: generation skipping, gifts to spouse, transfers before death
The tax at death and the tax on transfers that skip a generation were repealed and then reinstated. The gift tax was not repealed. All these taxes are now in effect. The top gift rates for transfers during life, the estate tax at death and which skip a generation are at 40% for 2013.
A transfer to a spouse is exempt from taxation without limit.
A gift made during life is exempt from taxation up to a limit for 2013 of $14,000.00 per year for each recipient(the annual per-donee exclusion). This amount is doubled for gifts by husband and wife. The life time exemption for gifts and estate tax is $5 million, adjusted for inflation after 2011. ($5,120,000 for 2012, $5,250,000 for 2013, 5,450,000 for 2016).
The exemption for generation skipping transfers is a cumulative $5 million for 2013, covering both transfers during life and at death.
If transfers during life, at death or skip a generation exceed the applicable exemptions or exclusions, the transfer may be subject to tax.
Even with this integrated tax structure, there are substantial opportunities for tax savings. For example, annual gifts equal to or less than the then current annual per-donee gift tax exclusion continued over a period of years will allow a tax free transfer of substantial property. In addition, gifts of property that will substantially appreciate can be transferred at its value at the time of the gift, which may be at or below the annual per-donee exclusion, with the appreciation in value passing to the donee tax free. This type of lifetime gift can be utilized with the transfer of insurance, closely held stock and other property having a substantial likelihood of appreciation over time. Another variation is the Grantor Retained Income Trust(GRIT). The planning involving such a retained interest transfer is complex, but the tax savings can be substantial. Frequently, there is no tax at the time of the gift. The trust income is a periodic gift as it becomes distributable to the beneficiary. The controlling estate tax factors have to do with the grantors reserved power to alter, amend or revoke as well as to designate who shall possess and enjoy the property.
Planning for these events, as well as the valuation of the property transferred, the application and allocation available exclusions or exemptions, the calculation of the tax, and the preparation of appropriate returns, are complex matters upon which it is best to seek professional assistance.
To make sure that your protected, it is crucial that you contact skilled and experienced Attorney C. Stephen Gurdin Jr. a Pennsylvania Estate Planning lawyer.
Call Attorney C. Stephen Gurdin Jr. at his Gurdin Law Wilkes-Barre Scranton Pennsylvania area office today, 570.826.0481 toll free 1.800.221.0618.