gifting in same year of deceased
If a Cleint gifted $112,000 this year in March out of his cash on hand and then He passed away in April of the same year;
a. Does the 112k still count towards his estate for tax purposes since its in the same year?
or
b. since he gave it away prior to his death, it can’t be counted towards his estate tax
If it wouldn’t count towards his estate tax, is their a limit on how many gifts of 14k he can give out in anyone year?
Thank you,
Douglas
Permalink Submitted by mk foss on Sun, 2013-04-28 23:40
Gifts in excess of $14K per person per year are included as part of a decedent’s estate. The $14KI is the 2013 limit, limits were lower in previous years. Gifts of less than $14k per person are not reported on Form 709 and are not reported on the decedent’s estate tax return. It is typical “death bed” planning for a sickly individual to make many of these annual exclusion gifts because they are not added back to the estate. One of the audit techniques used by Estate Tax Attorneys is to examine gifts made in the year of death to make sure that the checks had cleared the bank and are therefore out of the estate.There is no limit on the amunt of $14K per person gifts that can be given in any year.
Permalink Submitted by Bruce Steiner on Mon, 2013-04-29 00:44
More precisely, gifts in excess of the annual exclusion (currently $14,000) count against the $5.25 million exempt amount. Someone in a state having a state estate tax might make deathbed gifts of high basis assets such as cash and bonds, since (except for Connecticut) there is no state gift tax.
Permalink Submitted by Douglas Bauerband on Mon, 2013-04-29 20:07
Can it be gifts of stock and not just cash?
Permalink Submitted by Alan - IRA critic on Mon, 2013-04-29 20:40
Yes, any combination of cash and non cash assets are treated the same with respect to the gift exclusion and total exempt amounts. Of course, stock cost basis has special rules that the donee must understand when they sell.
Permalink Submitted by Douglas Bauerband on Tue, 2013-04-30 15:14
This is the response I receiced from the attorney on your “death bed” planning paragraph. It looks like he disagrees on the matter of the gifts not being allowed due to a 3yr lookback? I don’t disagree if it is part of a gift giving regiment. However, there are cases in NJ where there is a 3 year look back if the gifts are deemed to be made in contemplation of death. Of course, gifts to spouses of children will be subject to the 3 year look back under the Inheritance taxIs he correct that it has to be a regiment?Thank you,Douglas
Permalink Submitted by Alan - IRA critic on Tue, 2013-04-30 18:20
NJ has both estate and inheritance taxes. The attached will explain the NJ 3 year lookback period as of two years ago. Not sure if there has been any changes since then: http://willstrustsestates.blogspot.com/2011/04/deathbed-transfers-in-new-jersey.html
Permalink Submitted by Bruce Steiner on Tue, 2013-04-30 22:10
For Federal estate tax purposes, gifts in excess of the annual exclusion (currently $14,000) count against the $5,250,000 estate and gift tax exempt amount. Making annual exclusion gifts is a common technique. Making large gifts of high basis assets such as cash and bonds is also a common technique in states like NY or NJ that have a state estate tax but no state gift tax. With a few exceptions not relevant here, gifts are not otherwise included in the estate for estate tax purposes. However, New Jersey also has an inheritance tax. There is no inheritance tax on transfers to or in trust for close relatives such as the spouse, children and grandchildren. However, transfers to others, such as children’s spouses, siblings, nieces, nephews, friends, etc., are subject to the inheritance tax. For purposes of the inheritance tax, gifts within 3 years of death are included in the estate unless you can show that they were not made in contemplation of death. However, the New Jersey inheritance tax is a credit against the New Jersey estate tax, so it may not have any practical significance.The attorney handling the estate should be able to prepare the appropriate New Jersey estate and inheritance tax returns, as well as the Federal estate tax return.Bruce Steiner, attorney, admitted in NY, NJ and FL