What “Unification” of Gift
When you hear that the estate tax is poised to take 35% of the taxable part of your estate you might get to believing about offering gifts to your loved ones while you are still alive.
This is a really rational approach, however the powers that be are aware of the reality that individuals might be believing along these lines. So as a response, there is a gift tax in place that carries the exact same 35% rate to discourage people from going this route.
Now you may have heard individuals say that there is a $5 million lifetime gift tax exemption that enables you to give gifts amounting to this quantity without incurring any tax liability. It is real that there is a $5 million gift tax exemption at this time as an outcome of the passage of the Tax Relief, Unemployment Insurance Coverage Reauthorization, and Job Production Act of 2010 (it utilized to be just $1 million for people). You can certainly provide gifts equaling as much as $5 million over your life time complimentary of the gift tax.
However, the gift tax and the estate tax exemptions are merged. You do not get a $5 million estate tax exclusion in addition to the $5 million gift tax exemption for an overall of $10 million. There is a $5 million integrated estate/gift tax exemption. So, if you were to offer gifts worth a total of $5 million over the course of your life utilizing the gift tax exemption, all of your estate would go through the estate tax.
Of course this is a per-person exemption of $5 million. Among the provisions included in this tax act that was passed at the end of in 2015 allows for the portability of the combined estate/gift tax exemption. So now, when you die your surviving spouse may utilize your exemption in addition to his/her own. Provided this reality, couples do have a $10 million cushion to make use of at the present time.