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Estate Tax
Probate & Non-Probate Assets
Wills
Durable Power of Attorney
Medicaid
Income Tax: Step-Up In Basis
Gift Taxes
Titling Your Assets
Living Trusts
Avoiding Probate Court
Living Will &
Healthcare
Power of Attorney
Organizer of Information, Document Locations, and Funeral Arrangements
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No gift tax is due if lifetime gifts are less than $1 million. It is just necessary to file a return if gifts exceed $12,000 per donee in a year.
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There are many misconceptions about gifts and gift tax returns. The major misconception is that a donor is only permitted to give $12,000 per donee per year. The correct statement is that if a donor gives more than $12,000 per donee per year, the donor has to file a gift tax return. Filing a gift tax return does not mean that there is any gift tax due. There is no gift tax due unless gifts exceed $1 million in the donor's lifetime. Because it is rare for a donor to gift more than $1 million in his/her lifetime, it is rare when gift tax must be paid.
The purpose of the return is merely to allow the IRS to track gifts that are made by individuals who after death are taxable for Federal estate tax purposes. Because the allowable exclusion amount has been increased so greatly, this affects very few estates. See Estate Tax.
Below is a simplified version of a gift tax return, IRS Form 709:
| 1. |
During my lifetime, I can give $1 million with no gift tax due. |
$1,000,000 |
| 2. |
This year I gave my son, Sam, $612,000. I was able to give him $12,000, so I gave him $600,000 too much. |
-$600,000 |
| 3. | So, for my lifetime, I can still give $400,000 with no gift tax due. | $400,000 |
| 4. | Tax due: $0 | $0 |
| Signed: x ________________________________________ |
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| John Smith, Donor |
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Note: This is a simplified gift tax return.
There is no tax due because not more than $1 million was gifted.
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