When you gift assets during your life, a gift tax may apply, unless you use annual gift tax exclusions or your lifetime gift tax exemption. Assets that are transferred at death, on the other hand, may be subject to estate taxes if the assets exceed the estate tax exemption available.
The 2019 federal annual gift tax exclusion remains unchanged from 2018, allowing you to gift $15,000 to individuals without federal gift tax. If you are married, you can gift $30,000 ($15,000 per spouse) to individuals without federal gift tax. This can be helpful if you are setting aside funds for education planning, funding an irrevocable trust, or gifting to your family.
The combined federal estate tax and lifetime gift tax exemption increased from $11.18 million per spouse in 2018 to $11.4 million per spouse for 2019. This exemption allows assets to be transferred without federal tax at death and allows assets to be gifted during life that exceed the annual gift tax exclusions.
If you live in one of the states that currently has a separate state estate tax, there may be state estate tax due depending on the size of your estate at death. State estate tax rates and exemptions vary by state.
Commonwealth Financial Network® does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.