Course: Estate Planning
Lesson 4: Transfer Taxation I – Common Elements of Estate and Gift Taxes
Can I get some clarification on the Gift and Estate tax? As I understand it, individuals can gift up to $15,000 per year without “triggering” a gift tax; however, they still have the lifetime
exemption of $11.58 million. Gifts over $15,000 per year merely reduce their lifetime federal estate tax credit, correct?
I’m not aware of a gift giver actually paying a “gift tax.”
With this in mind, when would this tax table come into play? I can’t quite place it in context for the sake of the unified Tax Credit.
As always, thank you.
Only “taxable gifts” reduce an individual’s Basic Exclusion Amount for Gift and Estate Taxes.
- The Basic Exclusion Amount is the amount of wealth sheltered by the Unified Credit.
- If you go to the Gift and Estate Tax Tables and calculate the gift tax on an 11.58MM gift, you will arrive at a tentative gift tax of $4,577,800.
- The 2020 Unified Credit is $4,577,800.
- After you subtract the Unified Credit from the tentative gift tax, the gift tax due is $0.
Taxable gifts are completed gifts reduced by:
- Annual exclusion gifts
- Unlimited marital deduction gifts
- Unlimited charitable deduction gifts
Hence, annual exclusion gifts do not reduce the Basic Exclusion Amount.
For example, an individual gifting $1,000,000 to her U.S. citizen husband, $15,000 to each of the members of her Book Club, and $250,000 to a charity will have $0 taxable gifts. She will consume none of her Basic Exclusion Amount.
How completely does this address your question?
Onward and Upward,