President Proposes Reinstating Lower Gift Limits

If you are fortunate enough financially to be able to make significant gifts to family members and others, you may want to pay attention to the changes in gift limits tax law being proposed by the President.

For a number of years, the amount of tax-free gifts one could make was limited to an annual per-recipient amount of $14,000 in 2014 and an additional lifetime amount of $1 million dollars.

Those rules were liberalized beginning in 2010, when the gift and estate tax limits were unified so that the estate tax exclusion could be used for a combination of taxable gifts and estate tax exclusions.  This currently permits gifts up to the estate tax exemption limit of $5.34 million for 2014 without incurring any gift tax.  But gifts in excess of the annual $14,000 limit are not without future estate tax implications because a gift that exceeds the annual per-recipient exclusion reduces the estate tax exemption by the excess amount of that gift.  Thus, current gifts could cause the taxable estate of the gift giver to be higher and taxed at rates substantially higher than normal income tax rates when he or she passes away.