ESTATE AND GIFT TAX
For many clients, examining the estate and gift tax consequences is essential during the estate planning process to reduce or avoid taxes at death. For some families, potential inheritances from family members may also be a factor in whether their estate will be taxable. With the added complication of the ever changing rules on the estate and gift taxes, it is necessary to have the attorneys at Lauer Law to review your estate plan. Likewise, it important that your gift tax returns and estate tax returns are properly prepared to comply with the complexities of Federal and State law while minimizing taxes paid. Since Steve Lauer has been Florida Board Certified in Taxation since 1983 and Eva Lauer has an LL.M. in Taxation from the University of Florida, we are uniquely qualified to guide you through the gift and estate tax planning and preparation process.
Lauer Law will review your family’s assets and financial situation to develop a gift and estate plan that reduces or may even eliminate your Federal and State Estate Tax obligation while following your intentions and wishes regarding your estate plan.
Estate Taxes
Some commonly asked questions concerning estate tax law include:
What is the estate tax?
The estate tax is a tax imposed by the Federal government and some states (excluding Florida) on the value of property owned at death. The tax is paid by the decedent’s estate, based on the “taxable estate”, which is the fair market value of the “gross estate” on the date of death, or six months after the date of death (alternate valuation date) reduced by deductions (see below) in excess of the lifetime gift and estate tax exemption, which is $11,580,000 for 2020.
What deductions are available to reduce the taxable estate?
Transfers to a spouse
Transfers to charities
Funeral and administration expenses
Debts of the decedent
Do I need an attorney to prepare an estate tax return (Internal Revenue Service, Form 706)?
Because of the complexities of the Internal Revenue Service Tax Code and regulations, the Personal Representative of the Estate needs to engage the service of a Florida Bar Certified Tax Attorney, such as E. Steven Lauer, to prepare and file a Form 706.
How will the Tax Cuts and Jobs Act affect my estate and gift tax planning?
The Tax Cuts and Jobs Act was passed in December 2017. The primary change to gift and estate taxes under the Act was to double the lifetime exemption for the years 2018 through 2025. After this period expires, it is unclear whether Congress will make the higher exemption permanent or whether Congress will allow the law to revert to the previous exemption amount. As a result, clients may need to approach their estate planning with this contingency in mind. Further, a permanent provision of the Tax Cuts and Jobs Act requires that inflation adjustments are made using chained CPI, which increases at a slower rate than CPI. As a result, if the exemption reverts back to $5,000,000 with inflation adjustments, some clients will require tax planning to minimize their tax liability at death.
Gift Taxes
Some commonly asked questions concerning gift tax law include:
What is the gift tax?
The gift tax is a tax imposed by the Federal government and some states (not Florida) on value of property transferred to another without recompense during the donor’s lifetime. The tax is paid by the donor, based on fair market value at the date of gift, and has an exclusion amount per individual donor that is determined by the IRS. For 2020, the annual gift exemption is $15,000 and the lifetime exemption for gift and estate taxes is $11,580,000.
How does the gift tax apply to married couples?
Each spouse is entitled to the annual exclusion. For example, a couple with two married children could gift $30,000 to each child and spouse of the child, for a total of $120,000. Also, gifts by spouses can be “split” so that each spouse is deemed to make a gift of one-half of the total for the year.
What are some tax free gifting options?
While all gifts are taxable, there are some exceptions and exclusion. Generally, the following are not taxable:
Gifts that are valued below the annual calendar year exclusion ($15,000 for 2020) are excluded
Educational and medical expenses paid for another person, as long as they are paid directly to the institution or medical provider, are excepted.
Gifts to a client’s spouse and excluded
Gifts to a charity are excluded
Do I need an attorney to make a gift to someone?
If the gift is a simple transaction of limited value you may not need an attorney. However, if you are considering making a substantial gift to someone, clients should consult a gift tax attorney beforehand. With their expertise and experience in Taxation and the attorneys at Lauer Law can review your tax situation to recommend tax and estate planning strategies that minimize or eliminate your gift tax obligation while complying with laws and IRS guidelines.
