Limits on Tax-Free Lifetime Gifts

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Limits on Tax-Free Lifetime Gifts

The amount of lifetime gifts that you can give away without being subject to any gift tax is called the lifetime gift tax exemption. As the name implies, these are gifts that you make during your lifetime. However, it is important that you monitor them because they will reduce the estate tax exemption, which is the amount you can leave to your heirs without being required to pay any federal estate tax.

How the Limits Have Changed over the Years

The limits on lifetime exemptions have experienced changes through the years. This year and in future years, the amount of the exemption will be determined by the rate of inflation, and the tax rate will continue to be 40%. Currently, the lifetime gift tax exemption for 2014 is $5,340,000. In 2013, the lifetime gift tax exemption was $5,250,000, according to the stipulations outlined in the American Taxpayer Relief Act, which also authorized an increase in the tax rate to 40%.

In 2012, the lifetime exemption was $5,120,000, and the tax rate was 35%, which was the same rate in 2011, when the exemption amount was $5,000,000. This marks a dramatic increase from the $1,000,000 exemption with a 35% tax rate in 2010. The changes that occurred in the lifetime exemption between 2010 and 2012 resulted from a change in the law as stated in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

Projected Increase in Limits for Tax-Free Lifetime Gifts

It was recently revealed that the lifetime exemption will be increased for 2015, to $5,430,000. This represents an increase of $90,000 that you can leave to your heirs without having to pay any taxes. And as a married couple, both the husband and wife can have their own exemption. This means that they will be able to give away $10,860,000 without being subject to tax, provided that they did not previously make any lifetime gifts.

Should I Consult an Attorney?

If you would like advice on how you can avoid estate and gift taxes, and qualify for the lifetime exemption, you should consult an estate planning attorney.

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Last Modified: 10-08-2014 12:50 PM PDT

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