What is the unified tax credit and how does it affect gift and estate taxes?
The unified tax credit is the limit that you can leave your heirs free of federal estate taxes, also known as the “exemption equivalent” amount. For 2008, it is $2 million. In 2009, it rises to $3.5 million. In 2010, the estate tax is repealed — but for one year only. In 2011, unless Congress acts, the unified credit is supposed to go back to $1 million.
The unified tax credit is the limit that you can leave your heirs free of federal estate taxes, also known as the “exemption equivalent” amount. For 2008, it is $2 million. In 2009, it rises to $3.5 million. In 2010, the estate tax is repealed — but for one year only. In 2011, unless Congress acts, the unified credit is supposed to go back to $1 million. Is the transfer of property into a trust subject to gift tax? Gifts that are transferred into a trust may be subject to gift taxes. You can make an unlimited number of tax-free gifts per year, as long as gifts are not more than $12,000 to each person or entity per year in 2008 ($24,000 if a couple makes the gift). The limit rises to $13,000 in 2009. Gifts can be made to trusts and to charities, as well as to individuals. You must file a gift tax return if the amount transferred into a trust exceeds the annual limit. Fortunately, you generally do not pay gift taxes until you die, and then only if your total gifts plus your estate are o
