What You Should Know About Gift and Estate Taxes

Whenever you are settling an estate or giving a gift such as a car or home, there are certain tax laws that will apply to you.  Knowing what is important about these taxes is absolutely crucial.  Let’s look at what you absolutely have to know about gift and estate taxes.

One thing that you absolutely have to know about these taxes is that they can be huge.  They are also due any time that the fair amount of a property or gift is not received in return, so selling that huge home to your son for ten dollars won’t let him avoid it.  Worse still, the tax rate can be up to forty-six percent! 

 

Gifting to a grandchild rather than a child results in a double penalty, and you can actually pay the 46% tax twice, leaving the grandchild with next to nothing.  This means that you absolutely need to consider not skipping a generation whenever possible when you are looking to pass on your home.

With estate and gift taxes, you will find that you owe taxes on excess in all situations and on the property whenever the value exceeds a set amount.  One thing that can work to your benefit, however, is that unlike with gift taxes, there is an Estate Tax Credit that allows you a one-time $1 million exclusion to pass on property to your heirs.  This usually happens after the taxpayer has died.

If you are inheriting property or a large gift it can help to find a financial adviser to help, as these taxes are due nine months after the death of the taxpayer.  You don’t want to sell off your belongings to pay your taxes, and you need someone who can help you find a better option.

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