Taxable Gifts

 1. All gifts [not excluded from gift tax] which exceed a person’s Unified Credit or “Applicable Exclusion Amount”.

2. The Applicable Exclusion Amount under the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” or “2010 Tax Act” for gifts made in 2011 and 2012 is $5 million per person The $5 million applicable Exclusion is reached by both transfers triggering gift tax inter vivos and transfers subject to federal estate tax.

3. Uncertainty for 2013 Gifts: Uncertainty of Gift Rules Returns Similar to 2010 for Tax Planning

The 2010 Tax Act “sun shines” December 31, 2012]. Effective January 1, 2013 the law reverts to the “Economic Growth and Tax Relief Reconciliation Act.” or “2001 Tax Act”.

The applicable exclusion under the 2001 tax act is $1 million. In 2013 the gift and estate tax have separate annual exclusions: $3.5 million for estate and $1 million for gift tax.

Coupling

"Coupling” means a gift tax dollar paid to state offsets federal gift tax liability.

 1.     Decoupled means a tax credit is not applied for payment of state gift taxes.

2.     Only two states have a gift tax in 2011-Only Tennessee and Connecticut impose gift taxes.


Gifts are subject to                                           Generation-Skipping Transfer Tax or GST

        1.   The GST tax is applied to gifts or direct skips occurring at your death to skip persons.

        2.     The GST tax is calculated on the value of the gift, after subtraction of any allocated GST exemption, at the maximum estate tax rate for the year involved.

        3.     Each individual has a GST exemption equal to the applicable exclusion amount for the year involved. For 2011 the GST applicable exclusion is $3.5 million.

    4.     A direct skip is a transfer made during your life or occurring at your death that is:
        a.      Subject to the gift or estate tax
        b.     Of an interest in property, and
        c.      Made to a skip person.
                        i. A skip person is generally a person who is assigned to a generation that is two or more generations below the generation assignment of the donor.

              ii.For instance, your grandchild will generally be a skip person to you or your spouse.

        d.     The GST tax is computed on the amount of the gift or bequest transferred to a skip person, after subtraction of any GST exemption allocated to the gift or bequest at the maximum gift and estate tax rates.