Chris-
You are correct in your understanding. The gift tax is not paid until you exhaust your unified credit of $192K which is the tax due on $650,000 of taxable gifts.
Each person can give $10,000 per year per donee, tax free. i.e. mother and father can give each child $20,000 per year w/ out eating into their unified credit. This is the simplest form of estate planning and should always be taken advantage of by persons that will have taxable estates.
The $10,000 can be in any form. i.e. cash, stock, % of home, % of family business, etc. The only problem in giving non-cash assets is the need for an appraisal in many cases. Certain types of assets are allowed discounts which in effect allows you to give more than the $10,000.
The $650,000 exemption amount which is currently now $675,000, and will be increasing each year until it reaches $1.2M in the year 2010 if I'm not mistaken, could be the year 2007.
Anyhow, by the time the phase-in is complete, a married couple will be able to accumulate $2.4M of weath tax-free. This is assuming Congress does not change the present estate tax laws in effect, which is no guarantee. |
