Spouses can combine their gift tax exclusions to double the amount that they are able to give per recipient.
If you pay schooling or doctor bills on someone's behalf it's not a gift and does not count against the exclusion amount.
By its terms, the 2010 Tax Act will sunset after December 31, 2012, the estate and gift tax exemption is scheduled to revert to 1 million on January 1, 2013 and the maximum estate tax rate will increase from 35.Besides traditional gifts, the IRS may also find that an individual gave a gift when he or she sold an item for a price below its full value, or made a loan at a reduced interest rate.That the estate tax exclusion amount was raised to 5 million for 20 was big news.Any of the tax relief contained in the Bill could be curtailed, repealed, given an expiration date, or otherwise "held hostage" during the legislative process, as Congress and the President look for ways to cut spending or to increase revenue without tinkering with tax rates. .In effect, after available deductions are claimed on an estate tax return or after available deductions and annual exclusions (if any) are claimed on a gift tax return, the application of the lifetime exclusion amount (see below) will cause the net estate tax or net.The person making the gift can no longer have control over the assets.Importantly, the federal gift tax applies to transfers that meet the IRS criteria, regardless of whether the transferring party intended the transfer to be a gift in the traditional sense of the word.Wealthy individuals who were thinking about making significant taxable gifts in 2012, but who did not manage to move forward with those plans or to complete the gifts, should revisit those plans as early as possible in 2013, before Congress has an opportunity to make.In 2012, the inflation-adjusted maximum exclusion amount was 5,120,000 for estate tax, gift tax, and generation-skipping transfer tax purposes.
As the deadline approaches, many folks are trying to decide whether or not to take the plunge and make big gifts before year-end.Keep in mind that the same problem will exist at death if lifetime gifts are not made.The annual gift tax exclusion was indexed for inflation as part of the Tax Relief Act of 1997, so the amount increased in subsequent years to keep pace with the economy.The terms of the trust permit distributions of income and principal in the trustees discretion to the donors spouse."Fair market value" is defined as what someone would reasonably pay for an item in a reasonable exchange when neither the buyer nor the seller were under pressure to pay too much or sell for too little. .If the estate tax exemption is reduced in future years, a current lifetime gift can substantially reduce the estate tax burden to a family on the death of the donor.
It is impossible to predict.
The tax also comes due if you cumulatively exceed the exclusion amount, so if you give someone 2,000 a month for 12 months, you'll owe the gift tax on the balance of 9,000.