Estate Taxes

The federal government imposes an estate tax on the value of an individual’s estate upon death.  The State of South Carolina does not currently impose an estate tax. The federal estate tax exemption amount was set at $5,000,000 in 2013, and is adjusted annually for inflation by the Department of Treasury.  In 2016, the federal estate tax exemption amount is $5,450,000.  In addition, the law now allows a surviving spouse to utilize the unused estate tax exemption amount of a predeceased spouse via the estate tax exemption portability provision.

 The value of your estate for estate tax purposes includes everything that you own in your name, whether individually or jointly with someone else, as well as assets which you control.  This includes jointly held assets; personal property such as furnishings, furniture, jewelry, collectibles, and automobiles; life insurance proceeds (including group life insurance received through your employer), retirement accounts, and potentially assets in certain types of trusts created by you or created for your benefit. 

All estates receive certain deductions for expenses paid, such as funeral expenses, probate filing fees, probate and/or trust attorney fees, and accountant fees. Also, assets that are left to your surviving spouse will be eligible for the marital deduction in most circumstances, and any assets left to a qualified charity will qualify for the charitable deduction. 

Gift Taxes

The federal government also imposes a gift tax on gifts made by an individual during his/her lifetime.  Unlike income taxes, it is the person giving the gift, not the person receiving the gift, who is generally responsible for the gift tax.  The estate tax exemption amount is currently unified with the lifetime gift tax exemption amount.  This means that the amount of your estate tax exemption will be reduced after your death by the total amount of your lifetime taxable gifts. South Carolina does not impose a gift tax.

ANNUAL GIFT TAX EXCLUSION

Each year, you can make gifts to anybody you wish, up to a certain amount per person, exempt from any gift tax.  This amount is called the annual gift tax exclusion amount.  Lifetime gifts can help reduce your taxable estate.  Presently, an individual may gift $14,000 per year ($28,000 for a married couple utilizing gift-splitting) to anyone without incurring federal gift tax and without reducing your estate tax exemption amount. It is important to recognize that in certain cases such gifts may require the filing of a federal gift tax return, although no gift tax is actually owed. With advanced planning and thought, the annual gift tax exclusion amount offers many opportunities to help reduce the amount of estate and gift taxes that an estate may have to pay.

We can help you navigate the complicated laws regarding estate and gift taxes so that you can make the best decision for you and your family. Call the Miller Law Firm, P.A. today at (864) 527-0413.