The federal estate tax has always been controversial. There are those who look at the death tax as an instance of double taxation. After all, the assets that are being taxed are the resources that you were able to retain after paying taxes all of your life.
While some question the fairness of the tax, it is a reality that you have to react to if you are exposed. The tax carries a 40 percent maximum rate that can significantly erode the wealth that you have been able to accumulate throughout your life.
Unified Gift and Estate Tax
With some exceptions, you cannot give gifts to your loved ones while you are living to sidestep the estate tax, because there is a gift tax in place as well. The gift tax and the estate tax are unified under the tax code so the 40 percent top rate applies to the gift tax and the estate tax.
There is a $5.43 million unified lifetime gift and estate tax exclusion in 2015. You can transfer a total of $5.43 million tax-free, either while you are living or after you pass away. The rest would potentially be subject to the estate tax.
We should point out that federal transfer taxes are not levied on transfers between spouses. If you are legally married in the eyes of the law, you can transfer unlimited assets to your spouse free of taxation.
Annual Gift Tax Exclusion
In addition to the unified lifetime exclusion, there is also an annual gift tax exclusion. You can give up to $14,000 to an unlimited number of gift recipients in a calendar year without incurring any gift tax exposure.
The first $14,000 that you give to any one person within a calendar year can be given free of the gift tax, and this would not reduce the amount of your available unified lifetime gift and estate tax exclusion.
If you wanted to give a tax-free gift to someone within a calendar year that exceeded $14,000, you could use a portion of your unified lifetime exclusion to do so.
Dig Deeper
We have prepared an in-depth special report that will provide you with comprehensive information about the federal estate tax and its potential impact on high net worth families.
This report is being offered free of charge at the present time, and you can access your copy through this website.
To obtain your copy of the special report, visit this page and follow the simple instructions: Free Estate Tax Report.
Schedule a Consultation
We would be glad to help if you would like to discuss your situation with a licensed professional. We offer free consultations, and you can send us a message through our contact page to set up an appointment: Charlotte NC Estate Planning Attorneys.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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