Chapter 39Gift and Estate Tax Planning Basics

Gift planning can be an important part of estate planning. This chapter provides an overview of the federal gift tax and estate tax. Developing an estate plan for your assets requires professional assistance, but the basic guidelines in this chapter can help you begin to estimate your potential estate and start thinking about property transfers that may reduce or avoid the estate tax.

Relatively small gifts can completely avoid gift tax (39.2) because of the annual gift tax exclusion, which for 2014 is $14,000 per donee. Gifts to a spouse and certain gifts to pay educational or medical expenses also are not subject to the gift tax.

Gift tax (39.4) generally does not have to be paid even on very substantial taxable gifts because the tax is offset by a tax credit that for 2014 effectively exempts up to $5,340,000 of taxable gifts from the tax.

The credit for gift and estate taxes is unified, so the same exemption of $5,340,000 applies to the estates of those dying in 2014, to the extent that the exemption was not used to offset lifetime taxable gifts. An unlimited estate tax marital deduction is allowed for transfers to a citizen spouse. The estate of a married individual can make a portability election that allows any portion of the decedent’s unused exemption amount to pass to the surviving spouse.

Get J.K. Lasser's Your Income Tax 2015: For Preparing Your 2014 Tax Return now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.