Tax planning for Christmas?

Besides the feel-good factor that it provides, end-of-year gifting is also advantageous from an estate-planning perspective since it can move assets out of one estate into one taxed at lower rates and/or channel assets to the next generation.

In 2012, due to uncertainty over the federal, estate, gift and generation skipping transfer tax credit shelter amounts and applicable taxing rates, many individuals made significant contributions out of their taxable estate to take advantage of the $5.12m (£3.2m) federal exemption amount before a possible decrease to $1m.

In January of this year, however, Congress authorised a ‘permanent’ exemption amount (less any previous taxable gifts made). In 2013, that amount as indexed is $5.25m. In 2014, the amount is scheduled to be $5.34m. Married couples may currently pass $10.5m if both spouses are US citizens or domiciled in the US. Additionally, the annual exclusion for gifts increased to $14,000 in 2013 (and will remain at that amount in 2014). Married couples can also transfer $28,000 per individual if the couple elects gift splitting. Same-sex couples can now benefit in the same way as heterosexual couples so long as the couple are in a recognised ‘marriage’: civil unions or civil partnerships are not recognised as marriages. The annual exclusion amount for gifts from US citizen spouses to non-citizen spouses is $143,000 (due to rise to $145,000 in 2014)…

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