2011 Q4 Estate and Gift Tax

2011 Q4 Estate and Gift Tax

 ❖The federal and estate gift tax exemptions are each set at $5 million for 2011 and 2012.  ❖This year, the federal gift tax exclusion is $13,000. Excess gifts have gift tax consequences.  ❖Suppose that Marge Jones, a widow, gives $300,000 to her daughter in 2011. The first $13,000 is covered by the annual exclusion.  ❖The remaining $287,000 reduces Marge’s estate tax exemption.  ❖Assume that Marge dies in 2012 and has made no other gifts over the annual exclusion amount.  ❖In this scenario, Marge’s estate would have an estate tax exemption of $4,713,000: $5,000,000 minus $287,000.    

2011 Q4 Year-End Estate Tax Planning

2011 Q4 Year-End Estate Tax Planning

As mentioned previously in this issue, decedents have a $5 million exemption from the federal estate tax for deaths in 2011 and 2012. Many states also impose tax on estates or estate beneficiaries. Depending on the state, people with a net worth of $1 million or more may leave their heirs with tax to pay. In addition, future legislation might reduce the federal estate tax exemption. As a result, you may want to take some actions by year-end 2011 that can reduce your heirs’ exposure to future estate tax. Embracing the exclusion Do you have more wealth than the amount you’re likely to need for yourself and perhaps for a surviving spouse? If that’s the case, use your annual gift