Gifts can be more than just a generous offering to a friend or relative. They can also be an important part of a larger estate plan designed to make inheritance a tax-free situation for New York residents. It is important to understand how estate and gift taxes, and their exemptions, work so that you can avoid as much tax liability as possible.
The standard federal estate-tax exemption is $5.43 million in 2015. This means that a person can disburse up to that amount of money in assets before triggering any taxes on their estate. This number is technically doubled for spouses because each person is entitled to their own amount, and the amount carries over to the other spouse should one die before using up their entire amount. This number will be just fine for most people, but a high-value estate may exceed this amount. That is the time to get more creative when it comes to using exemptions.
The gift tax exemption is an annual $14,000 exemption. This means that gift amounts of up to $14,000 per year are free of all tax obligation. If one make gifts under the limit, they do not count toward the $5.43 million total; after an individual has exceeded the total, he or she can still make annual gifts under the limit without being taxed. This can be a great way to disburse inheritance funds over a long period of time.
There are many options went it comes to estate planning. The gift tax exemption is one way. There may also be trusts and other methods that may work as well. An attorney can help make one aware of their options and come to a plan that is best. Most estate plans make use of a variety of tools to achieve the best outcome.