Originally Posted by alessandra
I have a question about gift taxes.
#1;My understanding of the lifetime exemption is that a person can give $5.25 million in total in their lifetime without paying taxes on it.
#2;However the person who is going to be giving me the gift says that that amount relates to inheritance only. They've said: "That's inheritance. The donor has to die. Its 14k per year per donor tax free."
#3;Can you please clarify how the gift tax works and if it only applies after the donor dies.
#1:Correct due to the presence of Unified estate and gift tax credit, $1,772,800 for 2012. The unified credit on the basic exclusion amount for 2012 is $1,772,800 for 2012 (exempting $5,120,000 from tax), $5.25 million for 2013 after Annual Gift Tax Exclusion , $14K for 2013,subtraction.However, for estate tax purposes, on Form 706 all the decedent's taxable gifts made after 1976 are added to the gross estate. This is then adjusted by lowering the total estate tax by the amount of gift taxes that would have been due if the gifts had all been made in the year of death.
#2:Inheritance is NOT a gift; Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. As long as you recive money from the person decids to give it to you now, then, this is a gift.
The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead;$28K as long the donor or his spouse makes a gift to you, the gift can be considered as made one-half by him and one-half by his spouse. Currently, the person generally can give gifts valued up to $14K per person, to any number of people, and none of the gifts will be taxable.
However, gifts of future interests cannot be excluded under the annual exclusion. A gift of a future interest is a gift that is limited so that its use, possession, or enjoyment will begin at some point in the future.
#3; It depends, as long as the amount of their cumulative gifts exceeds $5.25 million for 2013, then they need to pay gift tax on the amount exceeding $5.25 million. In general, you are NOT subject to the gift tax as a done.