Estate and Gift Taxes

Estate and Gift Taxes

Estate Taxes

Some commonly asked questions concerning estate tax law include:

What is the estate tax? The estate tax is a tax imposed by the federal government and some states (excluding Florida) on the value of property owned at death. The tax is paid by the decedent’s estate or the beneficiaries of the estate, based on the “taxable estate”, which is the fair market value of the “gross estate” on the date of death, or six months after the date of death (alternate valuation date) reduced by deductions (see below) in excess of the lifetime gift and estate tax exemption, which is $11,180,000 for 2018.

What deductions are available to reduce the taxable estate?

  • Transfers to a spouse
  • Transfers to charities
  • Funeral and administration expenses
  • Debts of the decedent

Do I need an attorney to prepare an estate tax return (Internal Revenue Service, Form 706)? Because of the complexities of the Internal Revenue Service Tax Code and regulations, the Personal Representative of the Estate needs to engage the service of a Florida Bar Certified Tax Attorney, such as E. Steven Lauer, to prepare and file a Form 706.

How will the Tax Cuts and Jobs Act affect my estate and gift tax planning? The Tax Cuts and Jobs Act was passed in December 2017. The primary change to gift and estate taxes under the Act was to double the lifetime exemption for the years 2018 through 2025. After this period expires, it is unclear whether Congress will make the higher exemption permanent or whether Congress will allow the law to revert to the previous exemption amount. As a result, clients may need to approach their estate planning with this contingency in mind. Further, a permanent provision of the Tax Cuts and Jobs Act requires that inflation adjustments are made using chained CPI, which increases at a slower rate than CPI. As a result, if the exemption reverts back to $5,000,000 with inflation adjustments, some clients will require tax planning to minimize their tax liability at death.

Gift Taxes

Some commonly asked questions concerning gift tax law include:

What is the gift tax? The gift tax is a tax imposed by the federal government and some states (not Florida) on property transferred to another without recompense during the giver’s lifetime. The tax is generally paid by the donor, based on fair market value at the date of gift, and has an exclusion amount per individual donor that is determined by the IRS. For 2018, the annual gift exemption is $15,000 and the lifetime exemption for gift and estate taxes is $11,180,000.

How does it affect married couples? Each spouse is entitled to the annual exclusion. For example, a couple with two married children could gift $30,000 to each child and spouse, for a total of $120,000.

Why are some gifts taxable while others are not? While in theory all gifts are taxable, there are some exceptions. Generally, the following are not taxable:

  • Gifts that are valued below the annual calendar year exclusion
  • Educational and medical expenses paid for another person
  • Gifts to a client’s spouse
  • Gifts to a political organization

Do I need an attorney to make a gift to someone? If the gift is a simple transaction of limited value you may not need an attorney. But if you are considering making a substantial gift to someone, clients should consult a gift tax attorney beforehand. Experienced transfer tax lawyers such as E. Steven Lauer (who is certified in Taxation by the Florida Bar) can not only recommend tax and estate planning strategies to minimize the gift tax, but can also help ensure that transfers are handled according to IRS guidelines.

Attorney E. Steven Lauer and his professional staff have helped many clients minimize or eliminate gift taxes, and they can do the same for you. For an initial consultation, call Lauer Law, P.A. at (772) 234-4200, or complete our convenient contact form.

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