As announced recently by the IRS, the annual gift tax exclusion will remain at $13,000, unchanged from 2009. The exclusion amount is determined at the beginning of each year and is based on the Consumer Price Index of the previous year. The annual gift tax exclusion has increased by thirty (30) percent over the past 12 years, from $10,000 in 1997 to $13,000 in 2009 and 2010. This means that no gift tax return is required to be filed and no gift taxes are due on any gift you give under that $13,000 mark.
Each spouse gets to utilize the annual gift tax exclusion which means that a married couple can actually gift a total of $26,000 to each individual recipient without creating any tax liability or the need for filing a separate gift tax return. With the proper planning, a married couple would be able to transfer a significant amount of money to their children and grandchildren without any tax consequences and with the benefit of reducing their estate and thus any remaining estate tax burden on their heirs.
A married individual who has three kids who have each married and have each had two children of their own would allow for $312,000 per year to be gifted from their estate. (i.e. 3 kids + 3 spouses + 6 grandchildren) Do this for ten consecutive years and this individual could remove more $3.1 million from their estate. Given that the current estate tax rate is 45%, this could save $1.4 million in estate taxes.
There are many other ways of reducing your estate taxes and you should discuss your objectives and goals with an attorney at Wild Felice & Pardo, P.A. who will review your individual circumstances and make recommendations based on them. For more information about your estate planning needs, please contact Wild Felice & Pardo, P.A. at 954-944-2855 or via email at [email protected].