Originally Posted by
jively
Druff,
Not sure if this came up on 2+2; I did not look at any threads there.
Your explanation about gift and estate tax was pretty good. However, if a person gives more than $14,000 to a non-spouse in a calendar year, they don't automatically have to pay any gift tax. They do have to file a form with the IRS, and the amount over $14,000 starts to use up their lifetime exclusion, so that when they die, they can transfer less to a non-spouse before they have to owe any tax.
So, if someone gives a $400,000 house to their parents, $14,000 x 2 is excluded, and they file a form saying $372,000 was given to their parents, and no tax is due.
The lifetime exclusion is now $5,340,000 which is the amount you can give to a non-spouse at death, unless you used part of it in your lifetime. The estate tax rate is 40%. It hasn't been 55% since 2001. (There may also be estate and gift taxes based on the state where the giver lives. Some exclusions are lower than $5 million, but the tax rates are a lot lower as well.)
-Tom
P.S. I've been told by attorneys that even when people are supposed to file these forms, almost nobody does... It's usually parents giving gifts over $14,000 to their children.
