Federal Estate and Gift Taxes
For a long time, Federal estate tax has been a head ache to many affluent Americans. Leaving inheritance and offering gifts to their children have been a very expensive affair prior to 2014. This has been due to the high tax that was attracted by any American who wished to offer gifts to their children or even leave some inheritance. Previously Americans paid up to 50% in tax when transferring assets worth $1.5 million and gifting above $13,000. It means that an American who had an estate worthy $5 million dollar, and dies. He owed the federal government $2.5 million dollars in tax and the heir would receive only $2.5 million dollars. This is enough reason for affluent people to wail. But there are good news to all those who have something to leave to their children and those who would like to gift. The new estate tax and income tax law has made life more bearable and there are various reasons for Americans to smile.
First, Americans can now gift up to $14,000 up from $13,000. To add the icing on the cake is that gifting is not cumulative. It therefore means that with gift splitting; for couples, a parent with married children can gift $28,000 to his children at a go for as many times as possible in a year. The recipient of this gift does not even need to notify the government. The only time that the federal government should know is if the gift is received from a foreign source. Moreover, gift of value above $14,000 will attract 40% tax down from the previous 50%.