• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • BLOG
  • Newsletters
  • Reviews
    • Our Reviews
    • Review Us
  • Videos
  • Contact Us
  • WhoWe Are
    • A Message From Mark Costley
    • Meet Our Team
    • Communities We Serve
  • WhatWe Do
    • Advanced Estate Planning
      • Asset Protection
      • Business Succession Planning
      • Charitable Giving
      • Family Foundation
      • Family Limited Partnerships
      • Grantor Retained Annuity Trust
      • Irrevocable Life Insurance Trust
      • Planning For Charitable Gifts
    • Counseling Non-Profits
    • Elder Law and Special Needs Planning
    • Estate and Gift Tax Planning
    • Estate Planning
    • Probate & Trust Administration
    • Process
    • SECURE Act
    • Social Entrepreneurship & Business Law
  • WhyWe Do It
    • Peace Of Mind
  • Resources
    • Caregiving Resources
      • Caregiving Worksheets
      • Our Book
    • Definitions
    • Elder Law Reports
    • Estate Planning Resources
      • Estate Planning Articles
      • Estate Plan Checkup
      • Estate Planning Reports
      • Is Your Estate Plan Outdated?
      • Top 10 Estate Planning Techniques
    • Frequently Asked Questions
      • Elder Law
      • Estate Planning
      • Estate Planning for Parents
      • FAQs for Families Without an Estate Plan
      • Divorce and Your Estate Plan
      • Estate Planning for Women
      • Estate Planning 101
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Nursing Home Planning
      • Spliter
        • Philanthropy and Your Estate Plan
        • Planning for Dementia
        • Probate
        • Serving as Executor
        • Special Needs Planning
        • Tax Avoidance Planning
        • Trust Administration & Probate
        • Understanding the Social Security Retirement System
        • Will Contests
    • Pre Consultation Form
    • Probate Resources
      • Chapel Hill Probate
      • Raleigh Probate
    • Professional Resources

Clarity Legal Group

Estate Planning Information Center

919-484-0012 Schedule Consultation
Attend a Free Seminar
  • WhoWe Are
    • A Message From Mark Costley
    • Meet Our Team
    • Communities We Serve
  • WhatWe Do
    • Advanced Estate Planning
      • Asset Protection
      • Business Succession Planning
      • Charitable Giving
      • Family Foundation
      • Family Limited Partnerships
      • Grantor Retained Annuity Trust
      • Irrevocable Life Insurance Trust
      • Planning For Charitable Gifts
    • Counseling Non-Profits
    • Elder Law and Special Needs Planning
    • Estate and Gift Tax Planning
    • Estate Planning
    • Probate & Trust Administration
    • Process
    • SECURE Act
    • Social Entrepreneurship & Business Law
  • WhyWe Do It
    • Peace Of Mind
  • Resources
    • Caregiving Resources
      • Caregiving Worksheets
      • Our Book
    • Definitions
    • Elder Law Reports
    • Estate Planning Resources
      • Estate Planning Articles
      • Estate Plan Checkup
      • Estate Planning Reports
      • Is Your Estate Plan Outdated?
      • Top 10 Estate Planning Techniques
    • Frequently Asked Questions
      • Elder Law
      • Estate Planning
      • Estate Planning for Parents
      • FAQs for Families Without an Estate Plan
      • Divorce and Your Estate Plan
      • Estate Planning for Women
      • Estate Planning 101
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Nursing Home Planning
      • Spliter
        • Philanthropy and Your Estate Plan
        • Planning for Dementia
        • Probate
        • Serving as Executor
        • Special Needs Planning
        • Tax Avoidance Planning
        • Trust Administration & Probate
        • Understanding the Social Security Retirement System
        • Will Contests
    • Pre Consultation Form
    • Probate Resources
      • Chapel Hill Probate
      • Raleigh Probate
    • Professional Resources
Home » BLOG » Estate Tax » Gift and Estate Taxes – the Basics

Gift and Estate Taxes – the Basics

Estate Taxes When you sit down to create your comprehensive estate plan one of the primary goals you will likely have is to create a plan that reduces your estate’s exposure to federal gift and estate taxes. The reason for this is simple – every dollar your estate must pay in gift and estate tax is a dollar that is not available to support and provide for your loved ones after you are gone. In order to fully understand why avoiding gift and estate taxes is so important though, it helps to have a better understand of the tax itself. Only an experienced North Carolina estate planning attorney can answer specific questions about how federal gift and estate taxes will impact your estate plan; however, the following provides an overview of how the tax could affect you and your estate.

At the time of your death, everything you own, or I which you have an ownership interest, will become part of your estate. This includes both real and personal property and well as tangible and intangible assets. Unless your estate qualifies for a small estate alternative, your estate will need to go through the formal probate process. The purpose of probate is twofold. First, probate serves as a mechanism by which your estate assets are identified, valued, and legally transferred to the intended beneficiaries or heirs of your estate. Second, probate allows the government to make sure all tax obligations are fulfilled before those assets change hands. Primarily, this means the payment of any federal gift and estate tax due from the estate.

Shortly after your death, all of your estate assets must be identified and inventoried by the Executor of your estate if you appointed one in a Last Will and Testament or by a Personal Representative appointed by the court if you died intestate, or without leaving beyond a valid Will. Date of death values must also be ascertained for all estate assets along with the value of all gifts made during your lifetime. The combined total of your estate assets and lifetime gifts is then potentially subject to gift and estate tax.

Each taxpayer, however, is entitled to exempt up to the “lifetime exemption limit” before the tax is actually levied. Thanks to the American Taxpayer Relief Act (ATRA) of 2012, the lifetime exemption limit was permanently set at $5 million, adjusted annually for inflation. For 2016, the limit is $5.45 million. Therefore, for the year 2016, only the value of estate assets and lifetime gifts valued at over $5.45 million will be taxed. ATRA also established the permanent gift and estate tax rate at 40 percent. Let’s see how the tax actually works.

Imagine that you left behind an estate this year valued at $5million. You also made gifts during your lifetime valued at $3 million, for a total of $8 million. After you exempt the lifetime exemption limit you have a taxable estate of $2.55 million. ($8,000,000 – $5,450,000 = $2,550,000) The federal gift and estate tax due from your estate would be $1.02 million. ($2,550,000 x 0.40 = $1,020,000)Losing $1.02 million to Uncle Sam is not a preferred outcome for anyone. That’s over $1 million that could have gone to your loved ones. This is why tax avoidance is a common estate planning goal. How can you reduce your estate’s exposure to gift and estate taxes? The best way is to start planning early on in your life and to work closely with an experienced North Carolina estate planning attorney. There are a number of estate planning tools and strategies that can be incorporated into your estate plan to help limit the amount of tax levied on your estate after your death. Remember, every dollar you save in gift and estate taxes is another dollar available to help provide for your loved ones when you are no longer here to provide for them yourself.

For additional information on the subject of estate taxes, please join us for one of our upcoming seminars. If you have additional questions or concerns about your own estate plan, contact the experienced North Carolina estate planning attorneys at Clarity Legal Group® by calling (919) 484-0012 to schedule an appointment.

 

 

  • Author
  • Recent Posts
Mark Costley
Mark Costley
With more than 30 years’ experience in private practice, Mark Costley has helped hundreds of North Carolinians with estate planning, living trusts, financial law, probate, and trust administration. Mark’s work involves elements of teaching, strategic analysis and planning, documentation, and assisting clients in implementing their plans. He is devoted to providing the best in planning, efficiency, administration, and asset protection.
Mark Costley
Latest posts by Mark Costley (see all)
  • What Are the Drawbacks to Creating an ABLE Account? - May 15, 2023
  • What Is an ABLE Account? - May 5, 2023
  • What Is the Medicaid “Look-Back” Provision? - March 6, 2023

Date: January 21, 2016 Category: Estate Tax

Leave a Reply

Your email address will not be published. Required fields are marked *

Clarity Legal Group

Subscribe to Our Blog

Join the Clarity Legal Group® community by subscribing to our blogs addressing estate planning, elder law, asset protection, healthcare planning, special needs planning, charitable giving and more.

  • This field is for validation purposes and should be left unchanged.

Free Estate planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

  • This field is for validation purposes and should be left unchanged.

Follow Us

Address

Clarity Legal Group
1414 Raleigh Road Suite 445
Chapel Hill, NC 27517
United States (US)
Phone: 919-484-0012

reply@claritylegalgroup.com

Mailing Address
PO Box 2207
Chapel Hill, NC 27515

Exchange West Office Map

Office Hours

Monday9:00 AM - 5:30 PM
Tuesday9:00 AM - 5:30 PM
Wednesday9:00 AM - 5:30 PM
Thursday9:00 AM - 5:30 PM
Friday9:00 AM - 2:00 PM

Map

clarity_sidbr_map
  • About The American Academy
  • Disclaimer
  • Diversity
  • Sitemap
  • Privacy Policy
  • © 2023 American Academy of Estate Planning Attorneys.
    All Rights Reserved.
    Attorney Advertisement
  • Clarity Legal Group footer logo

    Clarity Legal Group is a registered Trademark and trade name for The Mark Costley Law Group, PLLC


    • Read Our 5-Star Client Reviews

"AV® , AV Preeminent® , Martindale-Hubbell DistinguishedSM and Martindale-Hubbell NotableSM are Certification Marks used under license in accordance with the Martindale-Hubbell® certification procedures, standards and policies."

x

Fill out the form below to access to the worksheets and checklists discussed in The Ultimate Caregiver Guide! After submitting this form, you can clic

  • This field is for validation purposes and should be left unchanged.