The Internal Revenue Service Announces An Increase in the Annual Gift Tax Exclusion

From the Hook Law Center

The Internal Revenue Service recently announced it has raised the limit on the annual gift tax exclusion; this change will give individuals more flexibility to make gifts during their lives in order to avoid the estate tax.  Starting in 2013, the annual exclusion for gifts goes up to $14,000 per recipient; it was previously $13,000 per recipient.  Spouses can combine their annual exclusions to double the size of the gift per recipient.
Considering the uncertainty of the estate tax exemption in 2013, this change is especially beneficial.  Due to the “fiscal cliff,” among other economic and political developments, it is possible that the new estate tax exemption will be lower.  While we know what the federal estate tax rules continue until the end the year, what will happen in 2013 and beyond is still unknown.
However, under current law the estate tax exemption is scheduled to drop significantly from $5,120,000 in 2012 to $1,000,000 in 2013.  Moreover, the estate tax rate is scheduled to jump from 35{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93} to 55{030251e622a83165372097b752b1e1477acc3e16319689a4bdeb1497eb0fac93}.  The portability of any unused exemption between spouses will disappear.  Thus, families with estate tax challenges are advised to consider leveraging the gift tax annual exclusion.

There are several exclusions from the gift tax limitations

The Internal Revenue Code includes other unique opportunities for lifetime gifts which are not subject to the gift tax.  The payment of tuition is an especially helpful way to transfer wealth from one generation to another without triggering gift tax.  As long as payments are made directly to an educational institution, a donor can pay for a student’s entire tuition without being penalized by the gift tax.  Medical bills, if paid directly to the provider, are also not subject to the gift tax.


Connect With Us

Korving & Company, Investment Management, Suffolk, VA

Newsletter Signup

Created by Array Digital
© 2018 Korving & Company, LLC