Estate planning is a critical process designed to designate and distribute a person’s assets upon their death, among other things. A Houston estate plan documents a person’s wishes if they become incapacitated or die and specifies who will effectuate the deceased’s wishes. These plans usually involve drafting wills and trusts, designating powers of attorneys and medical decision-makers, and addressing insurance issues and tax implications. It is crucial that individuals seek an attorney’s assistance to determine the current and predicted state of the law and how it may impact their beneficiaries.
What is a Gift Tax?
One area of estate planning that is currently under scrutiny is the federal gift tax. A gift tax is a tax on the transfer of wealth from one individual to another, when the gift is made during the gifter’s lifetime. In most cases, the person making the gift is responsible for paying the gift tax. The Internal Revenue Services (IRS) requires individuals to pay this tax if they give a gift to someone worth more than a specific amount. Currently, gifts made in excess of $15,000 reduce a person’s federal estate exemption when they die. For example, if a grandmother gifts her granddaughter $30,000 in a year, the first $15,000 is not taxable under the annual exclusion. However, after that, the remaining $15,000 counts against a person’s lifetime gift tax exemption and federal estate tax exemption.