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2014 Gift and Estate Tax Exemption Amounts Released

IRS has released the 2014 inflation adjusted numbers for estate and gift taxes. See the table below for the numbers and the paragraphs following for a more detailed explanation.

2014 Estate and Gift Tax Exemption Amounts IRS.gov
Estate Tax$5,340,000
Gift Tax$5,340,000
Generation Skipping Tax$5,340,000
Annual Gift Tax Exclusion$14,000

The estate tax and the gift tax are portable. Married couples, including same-sex married couples, will have a total exemption amount of $10,680,000 for 2014. At the death of the first spouse, any unused exemption amount will be transferred to the surviving spouse and added to their remaining exemption amount. To make this transfer, a federal estate tax return (IRS Form 706) must be filed for the deceased spouse, even if that return would not normally be required. A surviving spouse cannot collect unused exemption amounts from multiple spouses; special rules will apply if he or she remarries. This could be an important consideration for a wealthy widow or widower who is considering a remarriage.

On the flip side, most states do not have a matching state estate tax exemption. In fact, the exemption amount on the state level generally is far less. This will complicate your estate planning. Your estate could owe state estate tax when it owes no federal estate tax.

The generation skipping tax exemption is not portable. If it is not used by an individual, it will die with them. Wealthy individuals who want to leave assets to grandchildren (a skip generation) need to do the appropriate planning during their lifetime. Even a small Roth IRA left to a young grandchild could pay out millions over the grandchild’s life expectancy when only required distributions are taken each year.

The annual gift tax exclusion amount did not increase for 2014. It remains at $14,000 per gift recipient. An individual with 10 children and grandchildren can gift up to $140,000 at $14,000 per heir. The spouse can gift an additional $140,000 to those same heirs. Those gifts can be used by the recipients to pay the tax on Roth conversions thus allowing them to move their own retirement funds from taxable accounts to income tax free accounts. Also consider the reverse strategy - the child gifts $14,000 to the parent so the parent can convert the IRA to a Roth IRA that the child will later inherit.

If you have not reviewed your estate plan in the last two or three years, now is the time to do it. Most estates will not generate a federal estate tax under the current estate tax rules. You have an unprecedented opportunity to leave assets to your heirs federal estate tax free.

- By Beverly DeVeny and Jared Trexler


This is great! I recently heard of a major variation. Yes, the article talks about the per person per year limit of $14,000. The part that planners seem to rarely understand is that they have up to $5,340,000 to use. The $14,000 per person per year is excluded from the $5,340,000.

Consider this enhancement to the example above: Say the actual amount gifted was $300,000. The first $140,000 is excluded from the $5,340,000, the remaining $260,000 would be deducted from the $5,340,000 as it is a lifetime number.

This information allows for some amazing work to be done for families.

Richard Loek, Investment Advisor Representative
408-874-6234 - Direct / [email protected]
Onesta Wealth Management, LLC, is a California Registered Investment Adviser and can transact in California and states where registered or registration is exempted.

Is it true that I can make a tax free gift of $28,000 to my daughter if she is married???

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