When you hear that the estate tax is poised to take 35% of the taxable portion of your estate you might get to thinking of providing gifts to your liked ones while you are still alive.
This is a very sensible method, however the powers that be are well conscious of the fact that individuals may be believing along these lines. As a reaction, there is a gift tax in location that brings the exact same 35% rate to dissuade people from going this route.
Now you might have heard people say that there is a $5 million life time gift tax exemption that permits you to provide presents totaling up to this amount without incurring any tax liability. It holds true that there is a $5 million gift tax exemption at this time as an outcome of the passage of the Tax Relief, Unemployment Insurance Coverage Reauthorization, and Job Production Act of 2010 (it utilized to be simply $1 million for people). So you can indeed offer gifts equating to as much as $5 million over your life time without the gift tax.
However, the gift tax and the estate tax exemptions are combined. You do not get a $5 million estate tax exclusion in addition to the $5 million gift tax exemption for a total of $10 million. There is a $5 million integrated estate/gift tax exemption. So, if you were to provide presents worth a total of $5 million throughout your life utilizing the gift tax exemption, all of your estate would be subject to the estate tax.
Of course this is a per-person exemption of $5 million. Among the arrangements included in this tax act that was passed at the end of in 2015 permits the mobility of the combined estate/gift tax exemption. Now, when you pass away your surviving partner may utilize your exemption as well as his or her own. Given this truth, married couples do have a $10 million cushion to make use of at the present time.