When you hear that the estate tax is poised to take 35% of the taxable portion of your estate you may get to considering giving gifts to your enjoyed ones while you are still alive.
This is an extremely sensible method, but the powers that be are aware of the reality that individuals may be believing along these lines. So as a response, there is a gift tax in location that carries the same 35% rate to dissuade individuals from going this route.
Now you may have heard people state that there is a $5 million life time gift tax exemption that enables you to offer gifts amounting to this quantity without incurring any tax liability. It is real that there is a $5 million gift tax exemption at this time as an outcome of the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Task Creation Act of 2010 (it used to be just $1 million for people). You can indeed give presents equaling as much as $5 million over your life time free of the gift tax.
However, the gift tax and the estate tax exemptions are unified. You do not get a $5 million estate tax exclusion in addition to the $5 million gift tax exemption for an overall of $10 million. There is a $5 million combined estate/gift tax exemption. If you were to give gifts worth a total of $5 million over the course of 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. One of the arrangements included in this tax act that was passed at the end of in 2015 allows for the mobility of the combined estate/gift tax exemption. So now, when you pass away your surviving spouse may use your exemption in addition to his/her own. Offered this reality, married couples do have a $10 million cushion to utilize at today time.