It is sometimes said that no good deed goes unpunished and this would seem to apply to gift giving in the United States. We have a federal gift tax that is unified with the estate tax. So, any gifts that you give that exceed the lifetime exclusion that is afforded to you are taxable at a rate of 35% in 2012. If this was not enough, next year the rate goes up to 55%.
If your resources do exceed the exclusion amount you may want to look for ways to transfer assets to people who would someday be inheriting them free of taxation. This can be done in an indirect manner by giving educational and medical gifts.
The IRS does not impose a tax if you pay the tuition bills of students as a gift. Using this exemption you cannot pay for books and fees and you can’t give the money to the student; it must be paid directly to the institution.
You can also pay medical bills for others as a gift free of taxation. In addition to paying for treatment you could also purchase health care insurance for someone else and this gift would be tax-free as well.
The best way to respond to potential estate tax exposure is to sit down and discuss your situation with a licensed and experienced Somerset County NJ estate planning lawyer. Your attorney will evaluate your financial situation, gain an understanding of your wishes, and apprise you of your options with regard to the appropriate tax efficiency strategies.
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