Long Island Elder Law & Estate Planning

There is a gift tax that is applicable when you give gifts to others. However, there is an annual gift tax exclusion, and there is a unified lifetime exclusion. Let’s look at these exclusions and what they mean to you when you are planning your estate as a high net worth individual.

Annual Gift Tax Exclusion

Each year you can give gifts to others free of taxation as long as they do not exceed a certain amount per person. In 2014 this amount is $14,000.

To be clear, this is not a total of $14,000 that can be given tax-free each year. There is no limit to the total amount that you can give tax-free using this exclusion. You simply cannot give any one person more than $14,000 in a calendar year tax-free using this exclusion.

Each individual taxpayer has a $14,000 per person annual gift tax exclusion at his or her disposal. As a result, a married couple would have a total of $28,000 that they could give to any number of gift recipients annually.

It should be noted that this $14,000 figure is subject to adjustments to account for inflation. It could also be changed significantly via legislative mandate. Any time hear you about current tax laws, you should be aware of the fact that changes are always possible.

This is one of the reasons why you should consider developing a long-term relationship with a licensed estate planning attorney.

Your attorney will gain an understanding of your situation as it stands in the beginning of your relationship. Your lawyer will always be apprised of changes to tax laws. If your existing plan becomes obsolete, your attorney will be in a position to advise you with regard to the appropriate revisions.

Unified Lifetime Exclusion

In addition to this annual gift tax exclusion, there is also a unified lifetime gift and estate tax exclusion. The amount of this exclusion is $5.34 million.

Let’s say that you wanted to give a gift to a single person that was in excess of $14,000 in a given year. You could give the entirety of the gift tax-free by using some of your unified lifetime exclusion after you have exhausted your $14,000 per person, per year annual gift tax exclusion.

However, whenever you use  a portion of your unified exclusion, you are reducing the amount that you have to facilitate future tax-free asset transfers. This would include the transfer of your estate after your passing.

Tax Efficiency Consultation

If you would like to learn more about taxes on asset transfers and how you can mitigate your exposure, contact our firm to schedule a free consultation. We will answer all of your questions, gain an understanding of your objectives, and apprise you of your options.

 

 

 

 

 

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About Mark S. Eghrari, Estate Planning Attorney

Mark S. Eghrari is an attorney in private practice in Smithtown, New York. He has been in practice since 1988. Mark S. Eghrari provides extensive estate and tax planning services to individuals and businesses. Mr. Eghrari’s primary focus is helping clients avoid probate, minimize or eliminate Federal and State Estate taxes and protect their assets from the high cost of nursing care, if they become ill.