WHAT HAPPENS IF I TRANSFER MORE THAN MY ANNUAL EXCLUSION AND I DO NOT QUALIFY FOR ANY OF THE DEDUCTIONS OR EXCLUSIONS?

The gift tax code allows us to give away $14 thousand a year to any particular individual. In fact, as many individuals as we’d like to give $14 thousand to. If we exceed that amount, if we go to 14,0001 or 14,010, that 1 or that 10 are now essentially taxable. But there is further protection in our lifetime gift tax exemption of $5.49 million. Once I’ve given away $5.49 million in value, while I still may be able to do an annual exclusion gift, any gift in excess of that annual exclusion will now be taxed at 40%.

Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.

Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values.