Estate and Gift Taxation: Annual Exclusion and Gift Tax Deductions

Question 1

The Tax Relief Act of 2010

Answer 1

raised the gift tax lifetime exemption to $5,000,000 for 2011 and $5,120,000 for 2012

Question 2

The Taxpayer Relief Act of 2012

Answer 2

made these provisions permanent and the inflation-adjusted amount of the exemption became $5,430,000 for 2015

Question 3

The maximum gift tax rate

Answer 3

is 40%, making the estate and gift tax credit unified

Question 4

If a decedent’s taxable estate is equal to or less than $5,430,000 in 2015

Answer 4

the estate will pay no estate taxes

Question 5

So for 2015, the applicable (unified) credit

Answer 5

is $2,117,800

Question 6

There is an exception to the present interest rule. A transfer for the benefit of a person who has not attained age 21 is considered a gift of a present interest if all of the following conditions are satisfied

Answer 6

1) Both the property and its income may be spent by or for the benefit of the minor before she or he reaches 21 years old.
2) Any portion of the property or its income not expended for the minor before reaching 21 years of age must go to the minor at 21 years of age.
3) If the minor dies before reaching 21 years of age, the property and its income must be payable to the minor’s estate or as the minor directs (under a “general power of appointment”). (IRC Section 2503(c))