UNDERSTANDING TAX LAWS
A lot of people are kind of shocked when they hear about the details surrounding the gift and the estate taxes. After all, we all pay income tax every year so we are well aware of this annual ritual, and we see sales tax tacked onto all of our purchases so this comes as no surprise.
But these taxes on asset transfers are not something that you are faced with every day or every year so you may not know much about them. However, if you act without the proper information you could wind up making a costly error.
Let's take a look at the gift tax specifically. If you give gifts to your loved ones they are taxable if they exceed a certain amount. The lifetime gift tax exemption is unified with the estate tax exclusion. Right now that number is $5.12 million, but it is going to be reduced to $1 million in 2013 if the laws stay the same as they are right now.
So, you have to take pause and consider the tax implications if you decide to give gifts to your loved ones while you are still alive. You can use your unified lifetime exemption, but your available estate tax exclusion will be reduced by the amount of your gifts.
The solution is to seek professional counsel before making significant financial gifts to family members. To get all the details, don't hesitate to make an appointment to speak with a good Redlands CA estate planning lawyer who has a thorough understanding of the current tax code.